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The B Word

Don Southworth

IM NOT SURE HOW anyone can achieve financial peace and prosperity without addressing the “b” word—budgeting.

I got my first credit card in my late teens. I bragged that—in my wallet—I had whatever my credit limit was and could do anything I wanted with it. By my early 20s, I was in credit-card debt. But as long as I could pay the monthly minimum, I didn’t think I had a problem. Of course, the interest rate was astronomically high—sadly, I never read the fine print to know exactly what it was—and my savings were nonexistent. I was not on the road to financial peace and prosperity.

With the help of a good friend, I began working on my financial situation. We started by putting together a basic budget. I didn’t know where my money was going. I made up some numbers as my budget” and he had me track every expense for 30 days. I dutifully carried around a little notebook and wrote down every penny I spent, even if I put it on my credit card. It was one of the hardest and most sobering experiments I’ve ever undertaken. At the end of the month, my actual spending was $700 more than I had budgeted.

It would be a great story if I told you I changed my ways, started keeping and maintaining a budget, and lived happily ever after. Alas, my deeper awareness of how I spent my money did not lead to regular budgeting. I was able to cut my spending, but not enough to retire my credit card debt or start investing for the future.

Then I met Kathleen. She was a single mother making less than me and saving money. On our second date, I saw she kept a budget on her refrigerator door that listed every expense down to the exact dollar. I was terrified. But love conquers all. I learned someone could be so amazing that I could overlook her scary habits. We were married and I began to learn how to live on a budget.

Im not sure which is harder when you start budgeting—the commitment or the process of actually doing it. Since I chose to get married, the commitment was made. The process was a little harder to master. We sat down together and revised the tried-and-true budget that Kathleen had been using for years. This was before personal computers, so we had to use paper and pencil (although we could have used pen, because my wife didn’t change the numbers on a whim like I wanted to do).

One of the secrets she taught me was to list our expenses in our checkbook and track them before we spent anything else. This may seem obvious but it was a revelation to me. We would enter our paychecks and then record all the expenses for the next two weeks. While this made it more difficult to balance the checkbook—a concept I was only slightly familiar with—it was easier to track how we were doing. The details of budgeting may be obvious to many. But I’ve found one reason people dont do it is because nobody ever taught them those details.

As we earned more money over the years, it was more fun to budget and save. Within a couple of years, we began tithing and giving away 10% of our income. We opened another checking account to make it easy to transfer money we were going to give away before we even considered spending it or saving it.

Eventually, Kathleen trusted me enough and I trusted myself enough that we became less obsessed with budgeting. Its like when you start exercising or pick up any new habit. When you get into a regular routine, it becomes muscle memory and you dont have to think about what you’re doing. For a decade or two, we didn’t do any budgeting and we did okay. A couple of years ago, we again started recording every expenditure, so we can enter retirement with a firm grip on our expenses, and so we can figure out what we want and need when our income is more limited. Im surprised to say that Im actually having fun tracking every expense.

When I was serving in a congregation, I was often blessed with the opportunity to officiate at weddings. I would always meet with the couple to get to know them and do a version of premarital counseling. We would discuss the service and the best way I could customize it to make it special for them. Id also talk about the three biggest conflicts that come with marriage—sex, money and children.

Sex and children were fairly easy conversations. Money was almost always a challenge or an adventure. (One couple changed their mind about getting married after we had the conversation. Much easier than divorce, especially financially.) Falling in love and making a public commitment to spend the rest of your life with someone is one of the most sacred events in anyones life. The commitments that come after that day may not be as public or sacred, but they’re just as important—commitments like budgeting and living together with differences.

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Almost every couple had different perspectives on how to handle money. Some wanted to keep it separate and some mingled it together. Some were worried and some hadn’t thought much about it. They say opposites attract, and my experience personally and professionally—especially in the realm of finances—is that this is nearly always true. One person is risk-averse, while the other likes taking chances. One person worries about money and debt, while the other wants to live in the moment and worry about paying things off later. One likes to put budgets on the refrigerator and the other runs away in terror. When I would bring up budgeting to most couples, they said they knew they should” do it but hadn’t gotten around to it. I suspect thats true for many, if not most, people.

The b” word has gotten a bad rap. For too many people, a budget connotes pennypinching, financial claustrophobia and sacrifice. My 20-something self saw it as something for number nerds who dont have a creative bone in their body. My 60-something self knows how hard it can be to have the discipline and rigor that it can demand, especially in the beginning.

Im convinced that budgets can change lives because a budget changed mine. We just have to do a better job of marketing. I was schooled and practiced in sales and marketing before I learned about theology and grace. I ought to be able to help people see the wonder and magic of living with a budget. If my children are examples, I havent done a very good job.

Perhaps I can design a new line of refrigerators that come with a budget stuck on the front door. Or maybe I can add to my marriage-ceremony vows, highlighting how far the couple has come in making a spiritual and financial commitment to each other, including agreeing to spend X dollars on groceries, gas and goodies.

Everything that we can learn about investing, asset allocation, insurance, index funds vs. active funds, stock prices and bond yields is worthless if we dont start with the basics. And nothing is more basic than having a budget. Knowing how much we have, how much we spend and where it’s all going is a reality check not only for our money, but also for whether we’re living our values. If we do it right, and we’re lucky enough to do it with the right person, we might even experience another b” word—bliss.

Don Southworth is a semi-retired minister, consultant and tax preparer living in Chapel Hill, North Carolina. He recently completed his Certified Financial Planner education. Don is passionate about the intersection between spirituality and money, and he encourages people to follow their callings wherever they lead. Follow Don on Twitter @Calltrepreneur and check out his earlier articles.

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SanLouisKid
SanLouisKid
1 month ago

My wife and I entered every expense into Quicken for a year before we got married. It gave us a good idea of how things were going. We had a new house built and moved in one month after getting married. We had it totally paid off in three years. We both hate debt and that has probably worked to our advantage.

R Quinn
R Quinn
1 month ago
Reply to  SanLouisKid

What did you learn about how things were going by using Quicken? At the end of the day you already knew your net income and no doubt your saving amounts. Since you hate debt I’m guessing you didn’t carry credit card balances.

Quicken info didn’t change any of that. . No doubt you learned more about how you were spending your money, but I bet you really knew that too.

did the Quicken exercise change your lifestyle?

SanLouisKid
SanLouisKid
1 month ago
Reply to  R Quinn

You can see the big picture by mental tabulation (if you’re paying $2,000 a month on a mortgage you know your annual expense in that category is $24,000.) It’s all the little stuff that added up in certain areas that were of interest to us. We’ve now spent more on remodeling + landscaping + repairs + updates (water heater, roof, etc.) than we did on the original purchase of our house. That probably would have escaped us without entering it in Quicken. It’s not for everyone but for us it works ok. It takes work to setup and get started. After that it’s a few minutes a month.

Another “it will never happen” benefit is having a complete home inventory. I worked in the insurance business and when people had total fire losses they were asked to provide a list (and maybe receipts) of their contents. Let’s see, what silverware did I buy 24 years ago? An interesting comment from claims adjusters that intrigued me. They said they never paid out less than the full contents coverage amount on a total fire loss. Maybe people aren’t carrying enough contents coverage on their homeowners policies?

Last edited 1 month ago by SanLouisKid
Bob Tourdot
Bob Tourdot
1 month ago

I’m more of the pay yourself first persuasion. With payroll deduction.

Jeff Long
Jeff Long
1 month ago

I agree with Dick about the importance of discipline over budgeting. I was a CPA for 40 years and found people are either savers or spenders. Preparing a budget is easier than following it, the discipline part. There are too many “talking heads” with advice, who are often only selling their book, program or products. The concept is very simple, if outflow exceeds inflow you have a problem. People don’t want to see or hear that.

Nate Allen
Nate Allen
1 month ago

I’d be interested to hear the story on why the one couple called off the marriage when confronted with a financial conversation. What were the reasons for that (seemingly drastic) reaction?

Don Southworth
Don Southworth
1 month ago
Reply to  Nate Allen

The would-be bride realized they had very different values about some important things. I suspect she had some growing doubts and the conversation made her realize he wasn’t what she thought he was.

R Quinn
R Quinn
1 month ago

I’m an outlier on this topic. While most people will agree with you, my view is that the D word is far more important. That’s Discipline. A budget process can be stressful and I believe counterproductive.

The simple system is save first – start at a minimum of 10% – grow as earnings grow, never have a credit card balance at month end. The balance of your net income is what sets your standard of living. It can’t be anything else.

Occasionally one may want to know more about HOW the money is spent, but that is to shift it around, more to savings perhaps.

I would say no use of credit cards instead of no monthly balance, but the rewards they off can be valuable – if one remains disciplined.

DrLefty
DrLefty
1 month ago
Reply to  R Quinn

I’m basically with you. I figure as long as the bills are paid, the savings goals are met, and the credit cards are at zero, I’m not going to worry about if I can order an extra large vs. large pizza or if I can spend the extra $6 to get the ad-free version of Hulu. I just don’t want to figure it down to the penny. Close enough is good enough for me.

That said, as we’re getting closer to retirement, we do have an Excel spreadsheet that compares current spending with estimated/desired retirement spending/income. If something major changes (pay off the car loan, refinance the house, condo HOA fee increases), I update the spreadsheet, but that’s not the same as an everyday/week budget exercise.

parkslope
parkslope
1 month ago
Reply to  R Quinn

Discipline without budgeting is clearly better than budgeting without discipline.

That said, budgeting provides a structure that helps many people be more financially disciplined.

In addition to not budgeting, I’ve never set a precise savings goal besides maxing out my retirement contributions. While my frugality has enabled this to work for me I realize that budgeting is helpful for many folks.

Nick M
Nick M
1 month ago

It’s a shame when good intentioned advice gets mixed in with the confirmation biases of religious thinking. For example, we know sticking to a budget doesn’t work for most people, but it also doesn’t need to work, in the age of automated bank transactions. Other than as an occasional financial check up tool, recommending a continuous budget is like recommending that a teenager remain a virgin until marriage; it’s proven to be ineffective. Perhaps your personal success with using a budget is due to its combined use as a relationship aid in your specific situation, but that doesn’t change the fact that continuous budgets typically don’t work for most people. Given your clear intention to help other people, that seems like a significant problem.

Far more concerning is your statement that premarital counseling about children is comparatively easy. A person with poor spending habits can at any time address and modify those habits. In contrast, a person not appreciating the financial, emotional, and social impact of having children can’t just undo that decision. Given your CFP education, your premarital counseling advice may have unintentionally become the proverbial hammer that sees everything as a financial nail.

OUTinMinnesota
OUTinMinnesota
1 month ago
Reply to  Nick M

.
Knowing how much that a household is spending has no substitution.

  • It’s an imperative for your first visit to a financial planner. If you fake it, the advice you receive will be inaccurate – by your own fault.
  • It’s an imperative for answering the question: Do I have enough income & savings to retire? If you fake it, the consequences can be uncomfortable.

In this response, I’ve identified two checkpoints for which there is no substitution for knowing exactly how much your household is spending. Maybe you can think of others. Do them, or don’t. This article from Don Southworth tells you up front:

I’m not sure which is harder when you start budgeting—the commitment or the process of actually doing it.

Last edited 1 month ago by OUTinMinnesota

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