control your spending

while deciding to become minimalist has financial benefits, it won’t automatically fix your financial problems.  chances are if you overspent before becoming minimalist, you’ll continue to overspend – you’ll just find different things to spend it on.  if you or your family have been overspending your means, let me offer a spending plan that i have used with great success.

you can also find the article in the wall street journal.

the idea that distinguishes this “spending plan” from “a typical budget” is the understanding that while a budget dictates to you what you can spend, where, and when (“we can only spend $100 on groceries this month…); a spending plan allows you the control of your money every single month.  also, it realizes that your purchases change and expenses vary from month to month and that a one-size-fits-all monthly budget doesn’t truly fit anything.

so we have determined to use a “spending plan.”

using this model is quite simple, although it does require some effort from you on the front end and throughout the month.  to get started, determine your monthly take-home pay – not your gross income, but your net income (the amount on your check).

second, sit down and determine your fixed monthly costs.  these are the things that you currently have in your life that require some of your income every month – no questions asked.  the actual monthly expense may vary (within reason) from month to month, but you know it is going to be there. 

for us, here is our list of monthly expenses:

  • mortgage
  • charity
  • groceries
  • auto fuel
  • savings/retirement
  • gas
  • electricity
  • water
  • auto insurance
  • college loan repayment
  • cable
  • phone/internet
  • cell phone
  • garbage
  • newspaper
  • blockbuster online

after you have determined your monthly income and your monthly fixed costs, you can easily recognize your monthly discretionary income (the money that you have left over to spend as you desire).  for example, if you have $500 per month left over after paying your fixed costs, you have $500 in discretionary income.  the spending plan allows you the opportunity to spend that $500 as you desire: golf clubs, cinnamon rolls, dining, new clothes…

i have seen some wonderful benefits from this spending plan in my life:

  1. the initial realization of our discretionary income gave us a healthy framework to determine how much money we actually have to spend each month.
  2. the plan allows you to see how life patterns affect others.  for example, if i lay out my plan and realize that i need more discretionary income, i have a list of fixed costs that i can cut from – maybe i don’t really need cable tv if it means i can spend more on…
  3. we’re able to easily recognize how economics should be influencing our spending.  if auto fuel goes up $1.50/gallon, i quickly recalculate my fixed costs and determine how much my discretionary income has taken a hit.  conversely, if fuel goes down, i have a little extra that i can spend that month.

even if you don’t hold yourself to consistent tracking of expenses through the month, i recommend going through the initial layout just to get a sense of your “actual discrectionary income.”  it may just be the first step for you to finally control your spending.

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Joshua Becker

About Joshua Becker

Writer. Inspiring others to live more by owning less.
Bestselling author of Simplify & Clutterfree with Kids.

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Comments

  1. says

    josh. i like your plan. it works. to take it a step forward, I think its great to even try and budget out with your discretionary income. i get this from dave ramsey’s concept of a zero dollar budget. in other words, every dollar is accounted for. something that has helped my wife and I is receiving (as often as possible) individual “blow” money. this is money we each get to blow on whatever we want. but i’ve found it really helps saving in the long term when the “goodies” are accounted for at the beginning of the month. this takes planning, obviously. you’re right. its amazing how much more money you have when you have told it where to go instead of seeing where it went.

  2. Deb J says

    As one who is trying to pay down debt I know how much better this works. We don’t really have any discretionary income but knowing exactly where things go and what we can cut has been a big benefit. I’m just thankful that I can see the light at the end of the tunnel. My debt is mostly to the IRS and State because when I finally “won” my long term disability case the lump sum I was awarded did not have the taxes taken out like was supposed to have been done. I had nothing to show that it hadn’t so was quite shocked when the next January I received a 1099 showing no taxes had been paid. I receive $1043 a month and owed $12000+. It’s been an interesting ride. 18 months to go to get it all paid off. thank God that my mother was living with me and we have her small pension and SS.

  3. di says

    With one small income and 2 children, we only had the bare necessities and an inexpensive car.

    At times, minimalism is not a choice.

  4. di says

    Many of the listed items can be reduced on a regular basis.

    Pay 5% extra on loans.
    Decrease the grocery bill by changing your diet.
    Decrease the electric bill by using less appliances.
    Decrease insurance by changing companies.
    Try a land-line phone.
    Decide upon one form of entertainment.

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