Friday, February 4, 2011

The Saver and the Spender | Adjusting Spending Habits

Get Rich Slowly posted a reader question today that I can totally relate to. The reader asks how to motivate her boyfriend to stop spending so much and focus more on saving. My husband worked through a lot of debt and credit issues while we were dating, but - in my opinion - continued to bleed money and save nothing.

The thing that helped me curb my spending was creating a budget. Along with my fixed monthly expenses and savings goals, I also had to allot some money for miscellaneous things. I'm not such a miserly person that I will never grab a coffee or meet a friend at happy hour - I just try not to do these things too often. I decided on an amount that I thought was reasonable to spend, but when I took a look at my past spending (tracking my spending in Excel spreadsheets made this really easy!) I was flabbergasted to find out that I was spending way more.

Comparing what I thought was reasonable and what I was actually doing was a wake up call that has really changed my spending habits.

My husband is not a details guy and definitely doesn't want to see an Excel spreadsheet of his expenses and spending habits. However, painting the bigger picture for him in broader strokes has worked well for us. Since I'm the one knee deep in our finances every day, I pay all of our monthly bills. This way I know that everything will be paid on time (I'm not always perfect, but at least then I can yell at myself and not him) and that we never overdraw a checking account. Twice a month he writes me a check for his portion of the expenses. I cash these checks on his paydays.

Paying the bills as large lump sums really helps him see exactly how much his fixed monthly expenses are, instead of adding up a bunch of smaller line items in a detailed budget.

As a big picture person, my husband finds it hard to see how saving $416 a month in a Roth IRA, or 4% of his paycheck in a 401K is going to add up to retirement savings for our future. He'd rather not mess around with pennies, and instead take on a side job building someone's garage so that he can put a big chunk into savings all at once. The problem with that plan is that there's always somewhere else to spend that extra money.

Since he didn't want to think about what was a reasonable amount to save, we focused instead on what was a reasonable amount to spend every month. Like me, what he actually spends and what he thinks he spends are two very different matters. I gently told him this, but didn't bash his brains in with the details. Instead we used the amount that he thought was reasonable, subtracted it from his monthly income, subtracted his fixed expenses, and set up automatic withdrawals to retirement accounts.

We left a big cushion, but since he's still a spender at heart I didn't think he could immediately cut his actual spending down to the amount he thought was reasonable. He automatically saves, and pays his bills to me on payday. What is left over is basically his. I watch his bank account like a hawk to make sure he never overdraws. Sometimes he's fine, and sometimes he comes close to spending everything in the account, but my reminders that he only has another $20 until payday keep his spending in check without him having to put too much thought into it.

I still think he could be saving a lot more, but as his spending habits change his savings habits get better. I think we'll get there. I think we're already on our way, and I know we're a good balance for each other!

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