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:
- auto fuel
- auto insurance
- college loan repayment
- cell phone
- 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:
- the initial realization of our discretionary income gave us a healthy framework to determine how much money we actually have to spend each month.
- 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…
- 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 discretionary income.” it may just be the first step for you to finally control your spending.