Following a Budget Goes Both Ways

I received a text from my wife yesterday afternoon. "What do you want to do for dinner?" Knowing it was a Friday and the last day of the month, I immediately opened my budgeting app to see if we had any dining out money left. $76!!! I guess that's what happens when we're gone for half the month. Knowing we had a nice chunk of change remaining, we made a family date night out of it. We walked to a local pizza restaurant, then to a nearby ice cream shop. We had a blast!

There's a massive misunderstanding about budgeting. Budgeting it's about spending less.....it's about spending better. Yes, budgeting well keeps us from overspending. But it goes both ways! Budgeting, when done healthily, also prevents us from underspending. Spending better means being intentional, spending on our values, and removing negative emotions such as guilt, resentment, fear, and worry.

Many people would look at that extra $72 and proclaim it a win. Yay, we came in under budget!!!! But Sarah and I negotiated our budget at the beginning of the month, and we promised each other this was what we would spend money on. Us going out for a fun night was our way of honoring what we promised ourselves and each other. Just like we promised to pay our rent and life insurance, we promised to spend this money on dining out. It has to go both ways. We can't use a budget to only prevent us from having too much fun.....it also needs to encourage us to have fun. It's a tool to align our money with our values. And last night, our values pointed toward spending intentional time with the boys, creating memories, and enjoying some tasty food together.

The moment we treat budgeting like a one-way, fun-hating tool of cheapness and saving (er, hoarding), is the moment budgeting completely sucks. When that occurs, we start treating our life like a giant game of let's-try-to-live-like-broke-college-students-so-one-day-we'll-have-even-more. You know the problem with more, right? Every time we get more, more is still more.

There's a better way, and the better way is to have it both ways. Let the budget prevent us from coming off the rails AND let the budget force us to do the fun things we promised ourselves we would do. If more people viewed and handled money this way, budgeting may no longer be a four-letter word in most marriages.

Here’s the plan:

1. Make a budget on or around the first of the month.

2. Make sure your budget aligns with your values.

3. Do what you said you were going to do.

4. Track it.

5. Have fun!

6. Repeat.

If you follow these six simple steps, I promise you’ll find more joy, more peace, more intentionality, more unity, and more progress. Have a great day!

Giving Money a Purpose

Yesterday, I was in the middle of a coaching session with a new client (they are awesome!) when a hugely important topic came up. I was walking them through the idea and execution of sinking funds (i.e. separate named bank accounts for specific categories - travel, house, car, medical, etc.) I don’t remember the exact wording, but to paraphrase, they were curious why someone would do it this way rather than just having all the money in one account and mentally earmarked for future use. I absolutely love this question!

In theory, having all the money in one big pot would achieve the same purpose….and be administratively easier. However, in practice, it makes a world of difference. Here are a few reasons why:

Commitment: If we house all our money in one big pot, we can just make an impulsive decision and mentally reallocate the funds from one use to another. It takes no energy or work to butcher months (or possibly years) of work. When we separate these funds into unique accounts that are specifically named for that use, we’re less likely to reallocate this money for a different use. Doing so requires us to consciously make a decision and physically transfer money from one fund to another.

Emotion: If we house all our money in one big pot, it’s easy for us to feel guilty or regretful about a particular decision we’ve made. For example, let’s say we’ve set aside some money for a trip to Disney. The moment we feel financial stress, we’ll think to ourselves, “well maybe there’s a more responsible use for this money. After all, I don’t NEED this trip.” And just like that, we’ve dismantled our trip and all the amazing memories that surely would have come from it. When we separate these same funds into our travel sinking fund, it’s clear what these monies are for. There’s no doubt about it. “Travel Fund.” It’s literally in the name of the bank account! When we do this, we’re emotionally able to let go of the guilt and the regret, and simply go enjoy that trip. It sounds silly, but it’s true!

Administrative: The idea of sinking funds sounds administratively difficult. After all, having multiple accounts seems more complex than having fewer accounts. However, the execution is an entirely different story. When we push money into these accounts each month as part of our budget, it’s clear where the money goes. When we want to know how much money we have for our next trip, there’s an account balance staring at us. And when we start spending these funds (plane tickets, hotels, gas, etc.), we always know where we stand with the remaining balance. In other words, we get transparency, and with that transparency comes better decisions.

If you’re interested in setting up sinking funds for your finances, most credit unions allow it. Most banks don’t, with one exception being Wells Fargo. If your bank doesn’t (like mine), CapitalOne 360 Performance Savings accounts work great. I’ve been using this platform for more than 15 years, as do many of my clients. If you want to hear more about sinking funds, we did a podcast episode about the topic back in June 2021. You can listen on Apple, Spotify, or wherever you listen to podcasts.

Have an amazing day!