Save First Then Spend

IF EVERYONE WOULD just follow my advice when managing their money, all our financial problems would evaporate.

I’m kidding, I’m kidding.

From recently viewing a YouTube video, I learned it’s necessary to track all spending, have a budget and be mindful of spending habits. Nope and nope—but yes to watching our spending habits.

Managing money boils down to discipline and responsibility. You may not be able to keep up with the Joneses, take that vacation you desire or get that next tattoo. But that’s because you don’t have sufficient income—and a budget won’t change that.

A budget also won’t help with the dreaded “r” word: rationalizations. “It’s 40% off.” “It’s one of a kind.” “I have the cash.” “It’s only a cup of coffee.” I’ll skip, “Gee, Jenny down the street has one.” That’s for kids.

My contention: Tracking spending and attempting to follow a budget are crutches for undisciplined people. A strict budget says you can’t control yourself or your spending. I’d argue that budgets are stressful and depressing, and may even encourage some people to give up on managing their finances.

Budgets also get the savings process backward. It should be save first and spend second. If you don’t save first, you may never save—because “there’s nothing left over.” That, of course, is the lament of folks who claim to be living paycheck to paycheck.

The two most widespread financial faults are lifestyle creep and not saving for either short- or long-term goals. If you receive a raise or any extra income, increasing your savings should be the first move.

Yes, you need to have a good idea of what you spend on necessities each month. It only takes a few months to determine that, and then you’re done. If your take-home pay is net of retirement savings—or you have your savings automatically deducted from your checking account—then what you have left is all the money you can spend.

At the end of the month, if there’s nothing left in your checking account, you are—in a sense—living paycheck to paycheck. But so what? As long as savings are part of the equation and have been socked away, you should be in good shape. That said, if you can’t pay off your credit card balances in full, you’re living above your means—budget or no budget.

This is where discipline and responsibility come in. Saying “no” to yourself, your spouse and your children may be necessary. Take a close look at your habitual spending and at what costs are getting charged to your credit cards.

Eliminating items is not going to make you popular. In the long run, however, having lots of stuff, while drowning in debt and stressing out every month about your bleak financial future, doesn’t sound appealing, either.

Reducing savings is not an option. Gather the family and explain why.

Can everyone follow my methods? Perhaps not those in or near poverty. What about other folks? Look around you at what people are buying, the frivolous stores that keep doing business and our nation’s growing credit card debt. It sure seems like there’s plenty of room to cut spending.