Making Ends Meet

The old saying is wrong. Or at least from an emotional point of view it is mis-leading.

The old saying goes, “It all adds up.”

It would have more impact if the saying went, “It all multiplies out.”  The only problem is- that saying is lousy…”It all adds up” is much catchier!

Now look, everyone is sick of the same old story, “If you just cut out that $4 cup of coffee you could save twenty million dollars a year.” Can anyone come up with an original magazine article? Besides how many people do you know who actually get a $4 cup of coffee everyday?

It’s not the small habits that necessarily make the difference. It’s just the pesky math.  If you take the family out to eat twice a week and it costs $30 each time then you spend about $260 bucks a month- over $3,000 a year.  You can eat at home for a third or less of that amount.

Now the problem is that I think that you probably need to go out and eat- at least as our society is now. It gets you out of the house. It is fun. The food tastes good. You can’t just never eat out again. This is not about that. It’s about the principle.

Every time you spend money the effects of that multiply. Do you play golf every week? $50 a weekend for 40 weeks a year is $2,000. Have a shopping habit? $100 here, $20 there, a fabulous $9 pair of shoes over here. And pretty soon you are spending $300 a month.

Keep it in mind– “It all multiplies out”   Not in and of itself as a behavior modification tool- but as an awareness tool.

“Wow, I notice that I go to Red Box 3 times a week. That’s $156 a year.”
“I go to Sonic every night after work. Wow, that’s $27 a month.”
“My mobile phone plan costs $150 a month. My goodness- that’s $1,800 a year!”

Then if you are married you take both of your habits and expenses together and it really adds up.

The consequences and the solution:
The solution is not elimination, it is modification. Really, if you like Red Box then go to Red Box- but maybe you only do it twice a week- savings: $52 a year.
And say you go to Sonic three times a week instead of 5- savings: $156 a year.
Then you take a look at your cell phone bill and you realize you have a feature you don’t use- your bill is reduced by $30 a month or $360 a year.
Just these three little items and you have spent  $568 less.

Have you ever wanted to take a Caribbean cruise? That’s the consequence part. You can take a 5 day Caribbean cruise for around $600.  So by doing all these small things over and over and over you multiply your spending.  Instead you could almost pay for a cruise!

The important thing to remember is this- don’t try to cut all this stuff out. Obviously you “need” a mobile phone these days and going to Sonic is a ritual you cherish and a good movie is how you unwind.  So keep all these things around- just do them a bit less often so you can do big stuff more.

(Notes- Sonic- $1.50 a day, 5 days a week, 4.33 weeks a month.  Red Box- $1 a movie.)

Each of these “Ten Reasons” needs their own blog post. But if I want to get them in here for you site visitors to be able to see.

Ask me questions about them-  then once you read them you should fill out the form below to get started with your own Three Piece Plan.

1. It requires no continuous work- no entering categories, dividing up receipts, etc-   who has time for that?

2. You get paid every week. Or at least that is the way you will feel when you are on the Three Piece Plan.

3. You are doing SOMETHING.  Doing nothing won’t work. So having a simple system helps you keep your mind focused on getting out of debt and not overspending.

4. The Three Piece Plan decreases consumption. Because now you feel like you run out of money more often. So every week you find yourself eating at home, not shopping, etc. And the best part is that you don’t mind it!  You know you have money in the bank and that “pay day” is just a few days away.

5. You build an emergency fund almost automatically. Enough said!

6. You KNOW, instead of guessing and overshooting, exactly how much money you have to spend. This keeps you from bouncing checks, etc.  No more, “Whoops, I thought that check had cleared!”

7. You enjoy your money so it motivates you to spend it right. It is an UPWARD spiral. You spend less, you stress less, you worry less, you take care of things faster, etc.

8.  It is easy to adjust. If you get extra income you are not inclined to spend it so fast. If your income goes down it is easy to look at where you are and adjust accordingly.

9. Communication. It gets much easier on the Three Piece Plan. You look at how much cash you have, or how much you have in your “Today’s Money” account and know exactly what you have to spend. So it is easier to tell your spouse, “Uh, honey, we only have $25 to last two days, can you wait until Wednesday to get your hair cut?”

10. The Three Piece Plan family budget system is sooooo easy to set up. I can literally set up the basis for one in less than five minutes. It also works well for budgeting on a variable income.

We’ve already been working to get our money under (more) control for nearly a month. In a normal budget we would have not been able to stick with it for even three weeks.

So it’s the start of week four for us today. And I admit– it’s not as “fun” as it was three weeks ago- but guess what- that’s how the Three Piece Plan is designed. It does not have to be maintained or kept up with. Today I will go to the bank, get out the cash and we’ll spend it. The only thing we have to do is not spend more than we get out of the bank. Next Wednesday we’ll get more money out.  No “household items”, “automobile expense”, etc etc blah blah blah to keep up with. We just do our thing and the money takes care of itself.

Last week I said that we had overspent some- so I subtracted that from this week’s money. It just turns out that we did find- even working off of 75% of our normal weekly amount.  There is a reason for this- check out the category–”Why Use the Three Piece Plan”== it’s because the Three Piece Plan reduces consumption.  We knew going into this week that we were short of money so we just simply spent less of it.  Keep in mind that we got paid last Friday. We only get paid once a month…on the last working day which happened to be last Friday- three days BEFORE the first of the month. This should make for a long month but it also should have been the time of month where we are all excited and go out and eat and spend a bunch of money over the weekend.

But with the Three Piece Plan budgeting system we don’t have just one payday a month. We now have 4 or more paydays in a month! So making our money last from payday to payday is much easier.

Something different did happen this week- we were not short of money- it’s just that we needed some go go juice for the car. I had $15 with me and my wife had $20 or so with her.   So, I just put the gas on the debit card. Tomorrow when we pay ourselves I will simply deduct the $30– but this week instead of being short of money we will have about the same amount we normally would have had.

The point is this– it is VERY VERY VERY (Did I say “Very”?) important that you stay on track with your “Today’s Money”.  The whole idea is to spend less money now so you have it later.