Part 3 of the Financial Preparedness Series
I was talking to my sister this week about her recent diagnoses of Meiniers disease (an autoimmune disorder that’s requires a special diet) and how hard it’s been for her to change EVERYTHING that she ate. It’s been a total lifestyle overhaul. What’s a girl to do without SWEETS! Despite the abysmal look out for her sweet tooth, there is hope. Someone with her same disorder has a blog of recipes specifically tailored to her new diet regime. Desserts are back and better than ever.
Most importantly she feels way better (losing 5 pounds in a week was the frosting on the cake). I couldn’t help but think of my own diet after our conversation. Food wise there’s quite a bit I could stand to cut from my grocery list and cabinets. Financially speaking is where I really need the diet though.
I’ve been tracking my spending for 3 months now. Actually it’s going on month 4 because I’ve been procrastinating drawing up my budget, been hiding behind the excuse that I just had a baby, or Christmas wasn’t a realistic picture of my normal spending. Excuses, Excuses!
Like all of us that are dieting with a sweet tooth, tracking makes us aware of our eating, but really the hard part is cutting back. Usually when its time to slash the fat and sugar it’s our favorites that become the causalities. Financially this holds true too! Just like shedding extra pounds and having built up impurities within our bodies, shedding financial weight sets us free and makes us feel… well… like a million bucks.
Dieting requires us to examine the food we eat, read labels, and make difficult decisions, so does financial weight loss. Now that you’ve begun been tracking your spending, you now have a fairly accurate picture of where you are spending your “calories.”
This is why defining your ingredients is such an important part of the process of financial preparedness. Once you know what’s in the recipe we can tweak it to better meet our financial goals, or needs, just like you would change a brownie recipe loaded with oil and sugar. Luckily we don’t need a degree in culinary science (or lots of wasted nasty brownies) to perfect our financial cupcake recipe. You just need to determine wants vs. needs.
Determine Needs vs Wants
This is the hardest step to creating a budget and staying within its boundaries. It always reminds me of the poem –
“There, there, little luxury, don’t you cry you’ll be a necessity by and by.” (The Book of Selting).
Look at your list of categorized spending totals (seriously bring it out right now). Which of those categories were wants or luxuries? There is really very little in this world that is a NEED! So let’s run our list through a little test. Be sure to write down your answers as this will become the foundation for your future budget.
Will I literally die without this?
A cupcake requires certain ingredients like flour, liquid, and eggs in order to become a cupcake. The majority of your list should fall under this one. The basic necessities of life are food, shelter, and clothing.
Do I need this to acquire the necessities of life?
Without a leavening agent (baking soda/powder), salt and sugar, a cupcake is just a hard sea biscuit. Transportation, fuel, insurance, and sometimes wardrobe, fall under this category. If they are needed for you to hold a job they become a necessity because without a job you can’t provide the basic needs.
Is there a cheaper alternative? Is it more (quantity or quality) than I require?
We’ve all made the mistake of looking at the nutrition labels on a package of cookies and realized with shock that it enough fat to be a stick of butter! Do you really need all that fat? Sometimes our necessities expand beyond our needs.
- Do we really need an expensive designer wardrobe for work?
- Is later model sedan going to get us from point A to point B as well as the newer sports car? Or could you even take the bus sometimes?
- Do yoy need the highest data plan and newest phone in order to make phone calls?
- Is there a more cost effective provider or discounts you could access?
- Is the brand name as good as the store brand (food, clothing, etc)?
- Do you need enough food to feed an army or just enough for your family (see food storage on a budget)?
These may seem like small cuts but as Benjamin Franklin reminds us “little strokes fell great oaks.” Cutting (pardon the pun) can yield huge dividends.
Can I do it myself for less with similar results?
Store bought cupcakes vs. homemade. I think we can all agree this becomes an opportunity cost question. The professional verses the time and resources it requires to do it yourself. Cooking from scratch vs. eating out? Housekeeper vs. playing Cinderella once a week or more? Jiffy Lube vs getting dirty?
This should really leave a lot to cut! I bet you’re looking at your cable bill racking your brain to justify it as a need. I’m sorry but a lot of the things we fill are lives with are not necessities and should be on the chopping block. But that doesn’t mean they need to go. Once you have a spending plan or recipe with the necessities developed you can use the leftovers as needs or wants, depending on your goals. Like Weight Watchers points, using less now could mean more dessert later.
- Trying to get out of debt? Use these cuts to pay off your debts.
- Pad your Savings account, get that emergency fund! Which would mean no payments for a new car, or not having to use your credit card for emergency car repairs, Christmas or a vacation (the last two are not emergencies or necessities, sorry folks)
- Investment (only if you’ve done the first two already) – use what you save to create more to save, spend, or invest.
I know this is painful, so let’s do a little moral boosting. Total up ALL potential cuts (not what you think you could handle cutting). Take a good look at that total and ask your self what that could do for you. Even $200 can lower a credit card payment significantly, or pay for a new tire or two. Hopefully those sugar free, low fat cupcakes (gluten free – if you’re a real go getter) are looking really sweet right now.
Print our little cupcake to write that number on and tape it inside you’re wallet and checkbook. It should work like the fat picture hanging in the fridge.
For more insightful reading read Greed, Selfishness, and Overindulgence by Elder Joe J. Christen
Other posts in the Financial Preparedness Series – Get Financially Prepared – Identify Your Spending – Assess needs vs wants – Create a budget – Saving Money – Counting Cupcakes & Financial Preparedness
These books by Dave Ramsey have been crucial in helping our family get out of debt. See them on Amazon: