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No Budgets for Old Dogs


Every morning I get up around 5 am and work for a couple of hours. I should actually work out because if I don’t exercise right when I get up, it’s not going to happen. How familiar does that sound? But lately, I’ve enjoyed avoiding gym clothes in the morning and simply settling down with a pot of decaf and my dog Lucy.

Lucy is a standard poodle, but small for her breed – about 55 pounds. She is very happy to have human visitors but has never been sure of other canines. She seems to be jealous of our attention, though I can’t imagine why.

After ten years of Lucy, it’s clear we have nothing but love for her. How could you not love a loyal companion who, no matter what, always greets you with joy and cheer?

When we review our spending plan each month, Lucy is, of course, included. She has a targeted amount of spending. And like most of us humans, she also has tendencies to go over budget – like the time she got into a bag of snail bait and had to spend the night at the pet emergency center. 

Luckily for us, she survived that evening, and of course, like the loyal and loving owners we are, we were happy to pay the bill. We did, however, joke that she would have to find another place to cut back to be on target for the year. 

Needless to say, Lucy didn’t quite understand, and so she ended up going over plan. Was it a big deal? No, because we are still on track with our overall spending.

See, there are three tenets to Best Life Spending:

1. Your spending must help make you successful throughout your life. Too often, we think of spending as a necessary evil when it actually is not. Every expense you have is voluntary, and if each one is not moving you toward your Best Financial Life, it is instead taking you away.

2. It must fit with your goals and values. This can be tricky, especially if you don’t already know what your goals and values are.  For example, if you wish to center your life around your family, then every expense you make should, in some way, enhance your experience with your family.

3. It must bring joy – yes, every expense, even taxes. You might not immediately associate “joy” with spending, however, when you get down to it, spending is one of three factors that rule your financial life – along with what you make and what you have. So, if spending is that important – heck, we do it every day, don’t we? – Then we should be able to find joy in our spending too. Hint: It becomes easier as we become intentional with our finances.

Today, you’re in luck because we will walk through how to build and maintain your Spending Plan. A significant part, I might add, of shifting focus and finding the intention you need in your own finances. 

What is a Spending Plan?

A Spending Plan is your guesstimate of what you will spend over the next year. It is not a hope, a dream, or any sort of limit that you place on your spending. It is your personal projection of where the money you spend will go, and how much.

Tracking Your Spending

Before we can jump into projections, we need some basis for them. The best way, typically, is to review how you’ve spent in the past. While there are many fancy tools you can use to combine your accounts and do a review, I’ve found there’s no substitute for the good old fashion spreadsheet. 

You see, we all think about our spending differently, and I’ve yet to find a tool that is easy enough to use and flexible enough to adjust to how everyone looks at expenses. So off to spreadsheet-land, we go! 

Begin by downloading all the transactions from the accounts you use to spend money. This is typically your bank and credit card accounts. I suggest you do this for an entire year as expenses are not stable from month-to-month and if you want to get a good handle on what you are spending over time, a year seems to be the right time period.

Once you’ve got this data in a spreadsheet, assign a category to every expense. However, I recommend you try your best to keep the number of categories to a minimum. Once you start adding things like “Garbage & Recycling,” a category that you may only pay six times a year and only adds up to a few hundred dollars, the total summary of your expenses will be too large to understand. 

So, to make things easier, here are the categories I suggest you start with:

  • Auto (lease/loan payments, service, etc.)
  • Cash/ATM
  • Charity
  • Utilities
  • Taxes
  • Gas
  • Groceries
  • Fitness
  • Home Improvement
  • Insurance
  • Medical
  • Miscellaneous
  • Mortgage
  • Restaurants 
  • Vacation

Now, if it seems like you are putting a lot of items into the “Miscellaneous” category, that’s okay for now. And, if there is a category-specific for you, you can go ahead and separate it out from the miscellaneous, but it’s better to start small and add new ones later. 

Next, you can add up the total of all your expenses. This is the price tag of your current lifestyle. Surprising? Yes, most people are a bit shocked at the real cost of living.

To get a further breakdown, you can also add up the totals in each category to see more precisely what you’ve spent over the last year. If any numbers look out of line, review the individual transactions to remind yourself that these figures are accurate. 

Next, review how much you spent in each category and think about those expenses over the past year. Was this a high expense year for this category? Was there anything odd about what you spent during the year? Consider these questions and determine what you expect your spending to be in this category over the next year.

Repeat this step for all the categories listed, and once you’re finished, you have your Spending Plan.

Caution: Do not treat this as a budget. Budgets imply limits, and we are not trying to control our spending at this stage – we are merely trying to get clarity regarding what our spending actually is.

5-Year Plan

Now that you know what to expect in terms of spending, at least on the regularly occurring items, let’s make some projections of your cash flow. 

Write down your expected income over the next five years. Include your salary, bonus, and stock awards. For stock, be sure you are counting the amounts that vest, not the award your company gives you in that year. Remember, you don’t actually receive anything until the vesting date.

Below your annual income, list your expenses. This is likely your Spending Plan repeated for each of the five years. However, you’ll also want to add in any additional costs that are coming up. You might have a child beginning college in a couple of years, or perhaps you plan to buy a new car. Include the added expense.

Now, you can add up your net cash flow by year to understand whether you will be cash flow positive or negative each year.

As a general rule, I recommend keeping any negative balances in your savings account so we can be sure the funds are available for use when needed. We don’t want to put any funds required over the next five years into the markets.

What Gets in The Way? 

As you sit here and read this, it might sound quite easy. But don’t be fooled. Understanding your spending is a challenge. 

We don’t like to review our spending because we often feel judged, if only by ourselves. And no one wants to feel that way. As you go through the process, try your best just to let the numbers run as they are. Remember, we are looking for clarity at this point, and we don’t want to let ourselves hide the facts.

Another thing that bears repeating is that this is not a budget. I hate budgets and don’t ever use them. Budget is a bad word.

What we’ve built here is a Spending Plan. An actual plan we can use to spend our money in the best way possible. But no plan is perfect, and we don’t ever want to follow a plan solely because it exists. Instead, I expect you to mold and shape this plan as time goes by so that you are continually spending in a way that aligns with your values and goals.

For couples doing this together, it is imperative that you talk to each other. Remember, we all grew up differently, and the way we think about money varies greatly. If your partner says something about the plan that makes you uncomfortable or maybe doesn’t quite make sense, speak up. There are likely more challenges than meets the eye, and we want to connect with them as soon as possible so they can be resolved to both your satisfaction.

Here’s the Good News

With knowledge comes peace. 

Understanding how much you spend and the fact you can fund it from your income pushes anxiety out the door.

Most of us walk around, wondering in the very back of our minds whether or not we will have enough money to do the things we want in life. Understanding our spending and how our income will take care of it can really help get rid of those little voices.

Also, momentum makes this easier over time.

This will be difficult at first, but as the months go by, you will understand more and more about your spending. Soon, it won’t take very long at all to update your information, and you’ll start to understand why your spending is what it is. Your conversations with your spouse will become shorter as the figures come in on-plan and as expected. Or, if they don’t, you’ll have a better understanding of what that actually means for you.

As for Lucy, she seems unconcerned about her spending. In fact, the only things that gets her excited these days are other dogs and the many delivery trucks that come by each day.

Do you need help finding clarity with your Spending Plan? Feel free to reach out to me at joe@jwmwealth.com.