My Daily Dollars

Today’s article on “Failing Home Economics” in the New York Times got me thinking and reading a new blog.  You know, my mother was a home economics teacher, so thanks to her, I passed home ec with flying colors.  When it comes to budgeting though, Penelope Green found excellent examples of the failures we all make when we’re trying to save money: save $12 by forgoing expensive soup at the store only to spend $500 on dog beds. Give up summer vacation because of high gas prices before doing the math; it would really only cost $80 extra. Pass on the big screen TV at Best Buy only to buy a cheaper one at Wal-Mart. If you can’t afford a new TV, that “savings” is no savings at all.

Of course, (sorry Mom!) I have had plenty of my own failures in home economics. I saved $45 over three months by drinking generic coffee, but spent $45 for a salad and martinis at the Cheesecake Factory Friday night. I save $30 a year by canning my own strawberry jam, but spend $420 a year on a gym membership that I no longer use.

While the article makes the point that we don’t always spend and save rationally, I also appreciated behavioral economist Dan Ariely’s definition of rational behavior: “But I have a more relaxed definition, which is that rational decisions are those you make and don’t regret later.” It’s far too easy to laugh at someone else’s economic decisions. What’s more important is how you evaluate and reflect on your own.

Sure, the $45 dinner wasn’t frugal, but I don’t regret one minute that I spent with my friend.  On the other hand, I do regret the gym membership and curse the fact that I’m still locked into a contract with them.  In some ways, a budget helps us minimize potential for regret.  I have $150 a month for fun, and part of that went to dinner this month.  However, now the fun money is gone, so I need to find frugal ways to entertain myself until December 1.  It really doesn’t matter what I spend that $150 a month on.  As long as I’m allocating the rest of my budget wisely, I can just feel happy that I can afford money for a little frivolity each month.

This week I’ve been settling into the idea that spending, in and of itself, is not bad. If it’s something you won’t regret, you should go for it! Hoarding money just for the sake of hoarding won’t help you live your best life either. Being frugal, for me, is turning out to be about trimming expenses on things I don’t value that much so that I have more money for the things I do value.  What seem like illogical, lopsided trade-offs can actually be quite logical.  I’ve become pretty frugal when it comes to groceries and household cleaners, but now we have a lot more money going to savings each month.  I’m content with my new frugality in the kitchen.  The key is not to reduce ALL my decisions to some kind of stereotype: “I’m the frugal gal, so I’ll wear this cheap watch until I die.” 

In fact, all those irrational calculations are really just the manifestations of interesting, complicated people.  We’re faced with so many ways to spend money and so many choices in life, that we’re bound to make some quirky ones.  If we all just always acted on the rational impulse, we might pass home economics.  But I don’t think we’d be nearly as compelling!

For the last week or so, I feel like my husband and I have been spending like mad.  To wit:

1. A new car
2. stepdaughter’s birthday presents and party
3. new shoes (me)
4. new shirts (2 for him, one for me)
5. cologne (him)
6. a new watch (me)
7. very expensive juice (him. . .how expensive could juice be?  you’d be surprised!)
8. groceries and wine
9. dinner out (me)
10. plane tickets for Christmas

What’s interesting is the justification for each item:

1. see recent post. . . we’ll drive it for 10-12 years
2. must do
3. old ones were REALLY shabby
4. very cute
5. ran out of old lotion.  . .this was a great boxed-set deal
6. early Christmas present
7. could help his back pain
8. necessities
9. wanted to catch up with friend
10. want to visit parents. . . kids have never flown

For each item, there’s a (mostly) rational explanation.  Even so, we could have gone without each and every purchase, expect for groceries.  On one hand, it’s all good because we can afford each purchase.  I haven’t gone over budget for the month; in fact, I’m on track to save a little bit this month.  Christmas and birthdays are regular expenses, so we’ll allow for that in the budget.  On the other hand, I feel like we have left the frugal zone completely.  Once we opened the door to spending, it’s become easier by the day to spend more.  Shopping certainly begets more shopping!

What’s troubling me these days is how should we wisely balance spending money and saving money.  When I was paying off my credit card debt, I was so focused on paying it off that I did so six months ahead of schedule.  However, in order to do that, every extra penny (often my “fun” money) went to my debt.  It was easy to sustain that “crash diet” mentality for a few months, but I know that we can’t realistically do so for years and years. 

I’m now trying to figure out why spending money that is budgeted for spending is bothering me.  Between my savings and retirement contribution, we’re saving  about 20% of our combined income, as recommended.  The car payment moves us from 25% to 20%, but we’re still saving far above the national average.  Even so, I’m uneasy about spending what is actually budgeted.  I think, in some ways, I have yet to trust that the budget will get us to our financial goals.  Since I sent in that last credit card payment, I haven’t relaxed my debt-reduction mentality.  Well, I have started spending again (see items 1-10!), but I now feel guilty about those purchases.

Another factor is my old two-budget mentality.  I spent so many years over-indulging and feeling guilty, that now guilt is an integral part of the shopping process.  Even if I can now afford what I’m buying, it’s hard to shake off the guilt.

I do think we need to sit down and plan a Christmas budget, especially since travel is a big part of it.  We also have yet to draw up a detailed budget for the things my husband buys.  I think once we do so, then I’ll feel more comfortable.  I’m also tossing around the idea of meeting with a financial planner.  I was able to  draw up a plan to wipe out my credit card debt pretty easily, but planning out the next twenty or thirty years’ of financial goals is turning out to be more daunting.  By meeting with a professional, I might be able to trust our plan more.  By trusting that the budget will really work, I can trust that it is OK to spend money when we need to.  Then, finally, I may be able to shake this budget guilt!

Anyone out there have advice on finding a good financial planner?

Yesterday was our first snowy day here in Ohio.  I loved being all nestled in, watching the snow coming down.  November is great because all the winter-y things seem cozy.  Now, by February, it’s a whole different story!  While we had fun relaxing most of the day, it was time to get out of the house by late afternoon.  We went to Macy’s to use the last of our wedding gift cards.  We also planned to eat out because that’s our thing on non-kid weekends.  We try to keep eating out to a minimum, once every other weekend.

However, by the time we were done shopping, the thought of a long wait and a noisy restaurant didn’t seem all that appealing.  Thanks to my pantry project, I knew that I had all the fixings for a good stir-fry on hand.  It only took about twenty minutes to make; I know we would have waited at least that long for a table.  We had a relaxing dinner by candlelight, daydreaming about this year’s vacation.  And I was happy, knowing that we saved $60 or so by eating in!

Speaking of saving money in your food budget, if you haven’t seen The One Dollar Diet Project, be sure to check it out.  A couple decided to eat on only $1 a day each for thirty days to raise awareness about social justice.  The experiment is complete, so you can read through it in their archives.  Thanks to them and Kelly’s recipe for polenta at Almost Frugal Food, we now have one new, frugal dish to add to the repertoire.  

Other Good Reads:

PaidTwice has finally achieved coolness.  She’s right; I’ve noticed more savers and coupon clippers around these days as well.

Mrs. Micah warns about posting picture of your keys online (like all those folks do in the “What’s in My Bag” Flickr series).

Simple Mom advises shopping now for the holidays.  My mom agrees. . . she finished Christmas shopping Thursday!

We Like Money was able to save up some fun money and had fun spending it!  I so agree that you need to have wiggle room for a bit of fun while paying off debt!

Happy reading and enjoy your Sunday!