Recently, I have had a number of conversations with my friends about issues pertaining to money, and I am realizing that many of them do not know how to view and make decisions about the money they earn. Since this is an area that that Clayton and I seem to do well in and do not stress about, I wanted to share our process of thinking through money. Feel free to steal, adapt, or reject it. It has seemed to help a number of my friends recently, so I thought it was worth posting. For readers who do not know me well, we live on my teaching and random odd job salary of about $40,000 a year (my salary is public info since I teach) while my husband is full time at Wheaton Graduate School.
The thing that has been key for us when we view our money is this: Be aware of how much money we make and then make as many of the decisions about where and how much can be spent in areas beforehand.
Let me explain. Clayton and I make a spread sheet (updated about every 6-12 months). First, we put in all of our fixed expenses (insurance, utilities, phone, gas, grad school, etc.), taxes, and tithes. We view the remaining amount as discretionary money, meaning that the amount is variable and requires decisions about how much we will spend on it. For us, food and clothing fall into this category, as we can decide to spend $25-40/week on groceries or over $100 depending on where we shop and what type of food we buy. Shopping at Aldi and Springbrook Market allows me to spend the former amount on food, and yes, this allows for the average two meals a week we cook for others when we invite people into our home and packing lunches for both of us during the week. I just decided that I would figure out how to cook as many meals I can with the food that is available at those stores, and I can 99% of the time find what I need. For those of you who still believe that Aldi has some stigma on it, try it. Seriously, I can buy fresh Tyson brand antibiotic/hormone free chicken there for less than the generic frozen stuff at Jewel, organic whole wheat pasta for less than a dollar, organic soy milk, Dole fruit and veggies, etc. And, Aldi and Trader Joe’s are the same company—they both keep their costs down by not advertising and avoiding middle man distributers that increase costs.
The other main areas in our discretionary spending are out-and-about spending, gifts, and our generosity fund. By deciding up front how much we are willing spend and give away each month, it eliminates the anxiety of spending and enjoying our money, and it allows us to give joyfully when we hear of someone in need. Because we have already decided to give away a certain amount (beyond tithing) each month, it forces us to keep an open ear to the needs around us and allows us to happily give the money away when the need arises. You can choose whether or not gifts and “treating people” falls into this category, or if it will be separate. We have 4-5 weddings coming up this next semester, so we talked about how much we will spend ahead of time so that when it’s time to write the checks out or buy the gifts, we can do it happily and not worry about how it will impact our budget.
By deciding how much we will spend for out-and-about spending, I have been able to enjoy spending money with my husband and friends, as we both know what is reasonable for us to spend and roughly how often we can go out to eat or do something that requires money. This category in particular has been particularly helpful for a number of my friends, as they get anxious or even in fights with their significant others when they go out to spend money. They just needed help deciding what a realistic boundary was for their spending (in relation to their salary) so that they could feel free to spend and enjoy it. Most stress from spending money seems to come from not being aware of where the money is going and how much is left. If you don’t decide way ahead of time, you can start to feel or anxious and then strip the joy out of whatever experience you were trying to have. We don’t track receipts or anything like that, as we know roughly how often we can go out each month with the amount we set aside.
In short, by knowing your fixed expenses and setting and keeping to realistic boundaries for discretionary spending, you’ll be surprised at how much you can save and how much you can spend your money and enjoy it. I know the numbers are different for everyone, but making the decisions ahead of time helps to follow God’s commands to live simply, generously, and without worry about money.
This is a great post, Michelle! One of the biggest gaps in the American education system is teaching people how to budget and plan personal finances. Without this sort of education, individuals and couples are essentially left to fend for themselves.
What you’re proposing here isn’t overly complicated but absolutely critical to financial success: open discussion and forethought, budgeting, and spending less than you make.
Your blog is interesting!
Keep up the good work!