The dreaded “B-word” that every Spender hates to think about.

I’m sorry to say that it is now time for us to talk about that B-word.

Remember the chapter about how fences keep us safe? Just as that fence keeps children and pets safe, budgets keep us safe from our own impulses. That’s the whole point. You want to be safe around money, right? So let’s talk about how to set up a successful budget as a Spender. Remember, you will need to remind yourself to stay within the fence.

This budget is part of the boundary that you are going to put around yourself and your money. It will keep you from losing control and getting into a mess again.

If you are scared to budget, know that you are not alone. According to my survey, here are some of the reasons why Spenders feel out of control with their spending:

Do you relate to any of these? The main reason I stayed away from budgeting for so long was because I didn’t want to feel restricted. I liked spending money and I didn’t want anyone to tell me what to do. I had tried and failed so many times that I felt like I was a lost cause and would never be able to stick to any budget.

I find that many of the people whom I work with feel the same way. Many of them have tried to budget in the past but have not been able to stick to it. One member of my online community, Mary Ann, felt the same way when she joined. Mary Ann joined this course with under $5,000 in debt. She had tried budgeting in the past but did it as an annual budget, and she always failed. She always had issues with her budget because it was not flexible. She liked my method of planning for the upcoming month, making budgeting much more realistic. She was able to pay off over $700 in debt and add $1,000 to her savings account during the seven-week course

Mary Ann describes the Financial Renovation course as enlightening, empowering and life changing. The step-by-step course taught her a very practical and doable approach to money management. She says, “I have read several books and read other websites, but the Financial Renovation course really put it all together in a supportive and encouraging package.”

Sometimes having someone teach you what works for them can really make a profound impact.

When first starting a budget, it’s important to understand the difference between tracking your spending and prospective budgeting. You don’t need to track every single expense (that stressed me out just thinking about it). The better way is to budget prospectively for the entire month ahead. Brian Tracy, CEO of Brian Tracy International, specializes in the training and development of individuals and organizations. In one of his articles he states, “Every minute you spend in planning saves 10 minutes in execution; this gives you a 1,000 percent Return on Energy.” You save time by planning for your month before it starts, because instead of stressing all day long about how much money you have in your bank account, you are going to have more mental freedom to do the things you love. Am I convincing you yet that this could be fun?

It’s important to note that when you budget you should not be setting the same budget every single month. Your budget needs to be flexible and move around based on the anticipated expenses in the months ahead. If you think about it, different things come up every month: birthdays, holidays, new snow tires for the car… you get my point.

When Mark and I sit down for our budget night, we do it around the last day of the month. This gives us the time to discuss what is coming up in the next month. We anticipate what some of our activities and expenses may be. Here are some examples of questions you might ask yourself during this monthly budget night:

If you answered yes to any of these, figure out how much you need to set aside, then write those numbers down and save them for your budget night meeting.

To make your first budget, we are going to take out those statements you printed out from the last chapter. We are also going take out the worksheet that you used to calculate those averages from the past three months. Now it’s time to start putting your budget together.

The first thing you are going to do is to write down all of your expenses that are set in stone. Here are some nonnegotiable expenses that you have to pay every single month in order to live. These expenses are typically the same every month, so they are easily predictable. (Take note—cable TV is not on this list; you surely won’t die if you don’t have cable. Many men may disagree, I know…)

After you have written down these set-in-stone expenses, write down the expenses that can fluctuate. You may pay $50 one month for these items, and then $150 the next. This is why budgeting for each month individually is so important. Here are some examples of what those types of expenses could look like:

Let me stop right here and focus on clothing, because this is a tough one for Spenders. We like to shop, and that could mean you love the mall and buying new clothes. Clothing is necessary, but that doesn’t mean that a Spender can put clothing in her budget every month. This is one of those categories where you can either give yourself a spending limit every month (remember, you can still have fun within the fence as long as you can afford it), or you can have months when there is no clothing budget at all. Most months, buying new clothes can be more of a want than a need.

As a thrift store shopper, I write a small amount of money (around $10) into my monthly budget and shop at thrift stores on their 50-percent-off days. I still need to wear clothing, but it is important that I fit it into my budget every month and plan ahead.

Now we’re going to write down those expenses that can be negotiated, and we’ll talk about how to negotiate these in Step 10. Here are some examples of those kind of expenses:

Insurance (life, home, car, umbrella, etc.)—Call a local insurance broker and have them shop around for you. They can look at the lower rates and compare across multiple companies. You don’t pay them, because they get a commission from the company, and you get to save a lot of money.

Cell phone—Look into different types of cell phone coverage. Maybe opt to go down in minutes, or get rid of your iPhone for a year.

Home phone—Opt to get rid of it altogether. We haven’t had a home phone in seven years!

Internet—See if you can call and negotiate your Internet rates. Call and ask for the customer retention department, then ask what kind of deal you can get. Try to find a competitor in your area, and negotiate to get the lower rates they offer.

Next, we look at expenses you don’t necessarily need:

These items are some of the hardest expenses to cut out, because oftentimes they are the ones we really want. They are things we value, and what we do for fun. Your cable bill may be the toughest one, especially with sports fans in the home. Mark is a huge football fan. He loves the Eagles, despite our local team being the Buffalo Bills. When I first told him I wanted to cancel our cable, he was shocked and upset. After we sat down and talked about our debts and sorting out our needs versus wants, he finally agreed to cut our cable for a year so we could put that extra $80 per month toward credit card payments. I was thankful he was willing to sacrifice his cable, because it meant that our spending was heading toward being aligned with our values.

Last, we’re going to add in those random monthly expenses that you figured out earlier in the chapter. Maybe you have a banquet to go to and need a fancy dress, maybe you are traveling out of town and will need some money to stay in a hotel for a night, or maybe you want to buy a brand-new pair of shoes because you broke a heel on your last good pair. Whatever those random expenses are, put them in the budget. These are expenses that will change every month, which is why you can’t make a single budget that always fits every month. It needs to change and fluctuate with life events.

The most important part of a Spender’s budget is the Miscellaneous category. This category should just be labeled “the Spender’s Category” as far as I am concerned. In order for a budget to work for a Spender, you must write in a Miscellaneous category every single month. This can be $10 or over $100, but it must be accounted for. This is the category that is going to give you the freedom you want and will keep you from getting too frustrated. You won’t have to write down in detail what you spent this money on. This is your money to play with for the month. It’s also for those unexpected expenses that come up, like a kid’s field trip you forgot about, or dog food because your kid dumped yours in the toilet (yes, this happened to me). The important part is that you take this money out in cash, and once it’s gone, it is gone! You cannot spend any more of it!

When we first started budgeting, I took an entire month’s worth of our Miscellaneous money out in cash and spent it in the first two days! I’ve since learned to take our Miscellaneous money out weekly, so that I don’t spend it (one of my boundaries). I was so horrible at managing money that the $50 we set aside for the month was gone in the blink of an eye. I was so unaware about when and how I spent our money that this was a huge wake-up call to me. To this date, I can’t even tell you what I purchased with that $50. (I probably went to Target—and the rest is history.) The pain of going another twenty-nine days without spending a single extra cent was excruciating. I would find myself walking around a store and picking things up and putting them in my cart, then realizing I had no money with which to purchase those things. I would have to put it all back. This would happen dozens of times within a single trip to the store, and eventually I learned to stop going into stores.

This is when I started doing things to make extra cash, just so I could treat myself to a little something special instead of breaking my budget. We are going to go over how I did this in Step 11 but it was such a great feeling to earn money instead of putting us into more debt.

NOW, START SETTING UP YOUR BUDGET

Use the worksheet found in Appendix D to help calculate your monthly bills.

First, start with your income (your take-home pay).

Then subtract your set-in-stone bills (mortgage, car payments, etc.).

Next subtract your fluctuating bills (groceries, gas, utilities, etc.).

Now subtract any bills that can be negotiated (make a note of what those lower prices will be).

Set a Miscellaneous budget for the month (if you don’t have much money, take $5 out of another category, just to give you a little wiggle room).

Finally, I want you to take a look. Do you have any money left over?

If you don’t have any money left, any expenses still on your list have to be canceled if possible.

Those are not luxuries that you can have at this time. Get out of debt and promise yourself you can get them back.

If you do have money left over, let’s start saving for a rainy day. To start a rainy day fund, I recommend aiming to save $500 to $1,500.

Okay, gut check. Does this budget overwhelm or scare you? How do you feel after seeing it all laid out? Do you feel you can do it, or do you want to hide in a closet with your childhood blanket?

There is nothing to be afraid of. When I first set my budget, it was enlightening and I actually felt better. I hadn’t realized how many times I would need to tell myself no. I realized that much of my life revolved around buying new stuff and being surrounded by that stuff. Once I had my budget set up, I felt a lot safer in the stores, because I finally had some sort of plan to follow. But that doesn’t mean it wasn’t a huge challenge. I had tried so many times to put a stop to my spending, but would quit when it got too hard because I didn’t have a plan.

Not only did that plan give me a path to follow, but it also helped me think about money in a different way than I had ever done in the past. For example, if I spent four hours that week working on ideas that would save us $100 on groceries, I was a lot less likely to blow $100 at Target. Suddenly, my time invested in saving money became a way to keep me on budget and safely within my fence. Why would I spend four hours to save $100 and then turn around and spend that money in thirty minutes? That didn’t seem like a very good use of my time, energy, or money.

One of the difficult parts of this process is coming to grips with the damage you’ve done. But be encouraged that by working on your budget and setting these boundaries, you’ve just made a huge step on your way to recovery.

You can learn a lot from your mistakes when you aren’t busy denying them. So take this opportunity to come clean and be honest with yourself about your spending, because denial is only taking you further and deeper into your spending problem.

1. Be honest with yourself about why you do not budget.

2. Write down all expenses that are set in stone.

3. Write down expenses that can fluctuate.

4. Write down expenses that can be negotiated.

5. Write down all other expenses.

6. Make a date for budget night (around the last day of the month).

7. Create your first budget.

Chapter 19

Recovering Spender Step 6:

Set Your New Budget

NOW, START SETTING UP YOUR BUDGET

ACTION STEPS FOR THE RECOVERING SPENDER

STEP 6