wanting and needing and everything in between: the beauty of a basic budget

There are things I want.

Source: fab.com via Stephanie on Pinterest

There are things I need.

There are things I want but don't need.

Source: obliteratedheart.tumblr.com via Stephanie on Pinterest

There are things I need but don't want.

And there are things I want to need but don't need to want.

(I have yet to find an example of that last one.)

The beauty of a fine-tuned, tediously crafted budget

The other night Bob and I sat down and worked tediously through our tedious and extremely tight budget. Did I mention it was tedious? We have a shared Google doc with our budget and lots of tabs. One of the tabs is our queue of things to buy that don't fall into our regular budget categories.

In this queue we have prioritized the expenses that fall outside of our budget.

We have the things we need to buy now (a new windshield to replace the cracked windshield before it shatters.)

Things we want to buy but don't necessarily need to buy them, though they would make life easier. (Such as a steam mop. And a Dustbuster.)

Those are just two examples. The point is that we have gotten really specific and vigilant with our finances. The goal is to take all the guess work out of spending and saving.

While working through this process, I noticed two things.

Thing 1
It's a lot easier to distinguish between want and need when the stakes are extremely high and resources are limited. If you have $5 and you're hungry, you're not going to spend that $5 on a tube of tinted lip balm when you already have three in your bag and spending that $5 means you don't get to eat. No. You're going to buy a sandwich instead.

Last week, I was a guest at my mom's book club. Yes, my mommy got her book club to read Love in the Time of Foreclosure for their January book selection. (Best. Mom. Ever.) Anyway, the discussion was really wonderful. One of my mom's friends brought up Maslow's Hierarchy of Need.

via Wikipedia

She said, "It's easy to be concerned with self-actualization when you're living in abundance."

That really hit home. Especially because I have been thinking about that a lot lately.

Another way of saying that is that it's easy to be concerned with your personal psychological development when you're not flat broke. When you're not in foreclosure. When you're not unemployed.

When you're in that space of needing to fulfill fundamental human needs like shelter, food, water, breathing... you have no room or space to waste on wondering, wanting or any kind of existential concerns. It's all about providing. And the stakes are high. This is survival mode. (Notice that none of Woody Allen's characters are flat broke. At least not Owen Wilson's character in Midnight in Paris.)

Obviously, there are so many reasons why it's not appealing to live every day in survival mode. Especially when it's not your choice. But there are those people who actually choose to live here. Christopher McCandless comes to mind immediately. He was the Emory College graduate who gave away all of his belongings to live off the land in Alaska. Into the Wild is the book by John Kraukauer about Chris McCandless. (I highly recommend it.)

So there is something appealing about only having to worry about our most fundamental needs. About eliminating even the space to want. I definitely romanticized that notion different times throughout my life.

And I experienced the Zen of it when we were selling everything. Yes. It's wonderful to be set free from the material. It can be incredibly freeing if you have the ability to face it with a positive mindset.

Back when we were facing foreclosure it was a lot easier to avoid buying things we didn’t need because we didn’t have the money to even make that choice. We didn’t have to think “Do I really need this?” Because the answer was usually NO. You don’t. And we were so highly focused on the task at hand—saving the house.

Years go by. We begin again. We get back on our feet and begin to build up savings again. We get some room. We’re more comfortable. And foreclosure and short sales and mortgage payments are firmly in the rear view. That's when the wanting begins.

I've begun looking at property listings online. I gaze at houses and imagine a life in those images. I create entire worlds and stories. And then I shut it down. It's easy to do that with something as big as a house. Not so easy with the little things.

Things like a latte at the local coffee shop. A breakfast out. A new pair of jeans. On sale, of course. I want clothes. I hate mine at the moment. Bob and I haven't bought new clothes in years. Literally. Sure, I bought a sweater here and a pair of underwear there. And I've traded my clothes in for a few new items at Crossroads. But that's it. We both really want new clothes right now. But do we need them? Well... that's a little harder to answer.

It's not like we'd be walking around naked without them. So we don't need them for physiological reasons. But we do need them for reasons of esteem. The fourth layer in Maslow's Pyramid. It's just under the top. And this is how we categorize our needs. We don't need it to be safe, but we need it to feel good about ourselves. About our lives. That area can become so hazy so quickly that it requires constant checking in.

And that's what leads us to the second thing I noticed while budgeting with Bob.

Thing 2

When you budget with a fine tooth comb and really track your spending, there are no grey areas.

By budgeting every single penny (as incredibly tedious as it is) you actually eliminate the hazy area. It either fits in the budget or it doesn't. Every fiber of my being HATES sitting down to budget and track our expenses.

But (after a lot of internal and external kicking and screaming) once I give myself over to the process, I find freedom. I know myself well enough to only allow an hour maximum for this type of penny tracking at one time. And that helps. The knowledge that I won't be sitting in front of our spreadsheet for all eternity, but just for an hour.

It's been not only freeing to have this sort of command over our spending, but it's also been great for our marriage. I've been so unwilling to track our spending THIS closely that Bob has felt completely alone in regards to managing our finances. And that is so unfair. And just plain dumb.

For 2012 I'm done being dumb. Financial freedom happens through action. Not wanting. Not hoping. Not wishing or fantasizing. Action. That's it. And for us, that action is sitting down once a week with our budget and putting cross-checking, counting pennies and debriefing with each other on where we succeeded and where we failed that week.

Being able to know the difference between what you want and what you need is critical.

But it's okay to want even when you don't need...

As long as it's in the budget.

The lesson in change

Hi LITTOF readers!

I completed the 7-day Spare Change Challenge. Go to ChicagoNow to read my post "The Lesson in Change" about see how I did.

Thanks!

Stephanie

13 Personal Money Management Tips From LITTOF Readers

It’s been one week since my “B is for…” post where I wrote about the fact that Bob & I have filed for bankruptcy. I also asked for tips from readers on how you manage your money. I have loved reading your comments and getting your suggestions and thought I’d put them into a post because I have a feeling that the comments sometimes get overlooked. And there are some gems here. I found them to be on the whole practical, exciting, charming, specific, unusual and thought-provoking.

I'm not posting all of the comments in their entirety as some reiterate previous tips. (If you'd like to read all the comments as posted by readers, you can do that here.)

Without further ado, here are YOUR tips around making personal finance management easy (easier):

1. General Budget & Finance Check –
I stick to a general budget. I have a rough idea of how much I want to save each month, knowing that things happen and it's not always possible. I do a "finance" check once every month to see what I'm spending on. It hasn't changed much over the past couple years so I'm not as uptight as I used to be :) – Kim

2. Cash Envelope System—
We write out a budget each month, all of our expenses are listed with amounts and we calculate our income for the month. We have $$ budgeted for food/household/hygiene and that amount is set aside in cash at the beginning of the month. I can go over budget in this category so I use the cash envelope system and divide the cash into weekly amounts. Once the $ for that week is spent then that’s it – no borrowing from the next week or using a credit card. It’s made me make smarter decisions knowing I have limited amount of cash for the week – and since spending cash hurts more than a credit card, cash has helped me to carefully consider my purchases. -Holly (Anchorage, Alaska)


3. The RUDE little Post-It Note–
I give myself an allowance every week and when the credit card bill looks like its going over my self-imposed limit I put a post-it on the card with some rude little comment to myself to remind me to rethink my purchase. -mri

4. Dave Ramsey, Dave Ramsey, Dave Ramsey!
My Hub and I follow Dave Ramsey, my in-laws follow him, my sister Lindsey and her Hub follow him, and some of my friends as well. He knows his stuff and he obviously comes highly recommended from MANY people. By following his ideas last year we paid off 5 of our bills and we hope to add more to that this year. –Maxson trio

5. Detailed Budgeting & Quicken-
I have a very detailed budget, but often find myself overspending in some categories (usually in the "household" category!). I track all my money with Quicken. I've been using it since like '97. Seeing WHERE your money goes makes it really easy to change your ways and stop spending as foolishly. I'm also big on electronic banking and automatic payments. Make life simple, and make your money work for you. - Jessica

6. Write it down!-
I write down everything I spend on a spreadsheet and do a monthly spending plan balancing what's coming in and going out. If it comes up short, I cut entertainment, clothes and eating out OR see if there is a way to generate more income. I give very modest gifts for birthdays and things like that.

Also, I do not have an open active credit card. You won’t believe how careful you are with your cash when you have no "emergency" card. Because there is ALWAYS an emergency - like gas or food. That has been the single best thing I have done. And yes, I have huge student loans and all sorts of things but I have never gone hungry and I have never been homeless. The peace of mind is the reward for not spending more than you earn. It's priceless. - Anonymous

7. The power of the mind-
Poverty is in the MIND. Wealth is in the MIND. Many people would pay all they had to have a great partner in life. You are rich, keep that in your mind and soon the outside will reflect the inside. - Anonymous

8. Mint.com-
I forget where I heard about it, but I've been using mint.com as a way to keep track of our spending, credit cards, loans, etc. It's not perfect, but it definitely helps me visualize what we're spending too much on, where we can save more, etc. And, it also allows you to create individual budgets, too. - Nicole

9. Nausea As a Repellent-
We don't set a budget, but I get nauseated when I spend money (thanks for the money issues, Dad!) so that's a decent de facto system. -Marta

10. Cut Out the Booze-
My advice for anyone who wants to save money is to cut out alcohol. While I am not a big drinker so this is easy for me, my husband and I estimate that we save several hundred a month by not drinking (as compared to our peers). It’s worth every penny. -Megan

11. Monthly Check-In & Hide Your Cash-
I use Quicken to track household finances. I used to use a cash envelope system, but my apartment was robbed during that time. As it turns out, renters' insurance doesn't cover cash at all! I'd recommend a debit card and Quicken as a great way to go. As someone else noticed, spending habits are fairly consistent over time, so monthly check-in is probably all you need after you get a handle on things. - Suzanne

12. The Colorful Money Jar-
Since I moved to Australia, I don't qualify with my visa status for an Aussie credit card, so I live an all cash life. I have auto payments set up for rent and utilities, then I take out a set amount on Sunday from the ATM and it is what I get to spend during the week. Anything left over gets put in my money jar, which I keep in the kitchen. If I run out early, I can take from the money jar but not from my bank account. The weekly allowance is generally more than I need for a normal week, so the jar fills up with brightly colored Aussie money (pink! purple!) and once several hundred has accrued, I take a long weekend visiting some part of the country I haven't visited yet. -Abby

13. Streamline Your Budget!
I recommend a ruthless streamlining of your budget every couple of months, till you're convinced you are where you want to be. The tool that helped us the most was to keep a spreadsheet of our categories of spending the money that was left over after bills (eating out, movies, post office, coffee, parking fees, hair/beauty, clothes/shoes, etc.). It was shocking in some cases to see how the actual dollar amount was nowhere near our general sense of what we were spending in a particular category. - Crystal

Thank you for sharing your tips, what works and what doesn't work. I'm learning so much through this process!

If you have a tip you have yet to share, what are you waiting for? Go ahead and comment below. I'll be reading.

Thanks!
-Stephanie

B is for...

I’ve been putting off this post.

I haven’t wanted to write about it. I mean, I’ve wanted to, but didn’t know quite how. Well, I’ve been afraid. Afraid of saying it out loud. Of seeing it online. Of documenting my ‘failure’ for all the world to see. Of opening myself up for potentially massive judgment and the harsh critics on the internets (as my friend Jackie would say.)

So I’ve procrastinated. Wrote about other things. Waited. Until now. Because the whole point of this blog is to tell it like it is. Right? Yes. The point is to tell it like it is in order to hopefully make a difference for someone else in a similar situation. To be open. Honest. To accurately document our experience in the housing crisis and the great economic recession. Our view has always been that we are not victims. And that our present hardship is the fertile soil of our rebirth. This is our chance to be born again, so to speak. Our new savior? Simplicity. Financial responsibility.

Tell it like it is, Stephanie. Just own it. Do it.

Okay. But how? Well, just stick to the facts. In March I wrote a post about the facts that make up our lives and how we found freedom in relating to them as just the facts. Without adding anything.

So, to take a lesson from that post...

At this moment in time, these are the facts:

-WE are ‘camping out’ in my mom and stepdad’s walk-out basement.
-WE are moving in October to the San Juan Islands where we will live for 2 years rent-free taking care of someone else’s house (that story is here.)
-WE are no longer homeowners.
-OUR credit score is 511
-WE have just filed bankruptcy

There it is. Ouch.

Did you miss it? Should I say it again?

We have just filed bankruptcy.

We are insolvent.

We are bankrupt. Lacking in a particular desirable attribute (money.)

The letter of the day is B. And B is for Bankruptcy.

I know.

I know. Please don’t look at me like that. Like that! Oh, you’re not? You just had something in your eye? Well, the thing is that I am making an effort to relate to these facts as just facts and nothing more, but I’m not there yet.

Why?

Well, I guess because I’m afraid of what you will think. I'm embarrassed! It’s hard to confront the overwhelming extent of our debt and how we got there let alone how everyone else will now categorize us.

Let me be clear:

This is NOT where we thought we’d end up.
This is not where we wanted to end up.
This IS where we have ended up.

In Bankruptcy.

The B-word.

There are a lot of facts that led to the fact that we’ve filed for bankruptcy. And we are using all the facts to learn, to grow. The challenge is to not use the facts to beat ourselves to bloody carcasses. What good would that do? I see no upside in that.

When we first met with our bankruptcy attorney he said, in so many words, be good to each other.

"If one of you drinks or eats or is short with the other, just know that it’s probably because of this. Bankruptcy. Because most people have a conversation in their heads that says, I’m a loser. Don’t listen. Just ignore it. It’s just a conversation."

He said all of this with extreme intensity. He wanted to make sure we heard what he had to say.

He said that bankruptcy is hard on marriages because, he pointed at Bob and said, “He wants to build you a castle," he then pointed at me, "and you want a home that’s safe."

He let that hang for a beat. Simple. But true. The truth of that simple statement hit us between the eyes. "And when that doesn’t happen," he continued... clear that he had our attention, "you think you failed. A lot of couples end up in divorce court next and I hate seeing that happen. It doesn’t have to be like that. Okay?" Okay. "Good. You're going to get through this."

And with that he handed us our marching orders. It was a relief. We were so afraid of that meeting. Of acknowledging that this is where we've actually landed. Of the embarrassment! But once we did, it wasn't so scary.

And we could have just gone about our business and never told a soul. Started fresh. No one would have to know. Except for the fact that I have this blog and I feel an obligation to be as truthful and vulnerable as possible. And our commitment to peeling back the curtains for the benefit of others. Which leads us here. To this moment. To me sitting in a coffee shop in my hometown on my day off work typing out the facts.


Photo Credit: Cookie Monster Wallpaper - deviantART by Elmhoe

Now that the cat is out of the bag, I’ll be writing a lot more about the process of going through bankruptcy and its effects on us and what we’re learning. I expect questions. Ask away. Please.

I have questions too.

First of all, do YOU live on a strict budget?

What tools do you use to track your spending?

Comment below or e-mail: loveinthetimeofforeclosure@gmail.com