As a Financial Coach who helps married couples make better decisions, I can tell you with 100 percent certainty that your calendar and bank account know you better than yourself.
How can that be? It’s because our time and money point to what we value most. If we value our hobbies, they will show up in how and where we spend our free time. They often show up in our discretionary purchases too.
I value my wife’s awesome cooking. You can see some of them on display here. By the way, my waistline also gives away my secret addiction to her culinary concoctions.
Anyway, back to the story: We spend an extraordinary percentage of our income on groceries. Studies have shown the average household grocery bill should be around $150 per person, per month. Ours is almost twice that.
Are we being irresponsible? Absolutely not. It comes down to our priorities.
My wife and I began a journey to get out of consumer debt about 8 years ago. Surprisingly, it only took 13 months to clear out approximately $15,000 in debt. We weren’t cutting down on groceries back then, we didn’t skip the occasional trip down the wine trail here in St. Louis.
What we did do was make it a priority to focus every dollar I earned from a side hustle (I’ve been a mobile entertainer for over 30 years) to paying off debt. If I made $600 to DJ a wedding then $600 went towards debt. A $1,000 corporate event turned into the equivalent of $1k in debt reduction.
Normally, a portion of that money would have been spent on new music or a new piece of equipment. But debt elimination became the priority and everything else was pushed down the list.
There is a process I walk my clients through that isn’t a traditional budget per se, it’s an exercise to get spouses to expose their true priorities – sometimes to themselves!
If I were to sit down with your bank account and credit card statements and compare the transactions to your calendar then a certain level of realization would come to pass.
Note: This isn’t a way to uncover unnecessary shopping sprees or a financially misbehaving spouse. However, it does shine a light on things we may not have realized we value to be more important than a well kept home or paying a credit card in full every month.
Try this exercise
- Take out a piece of paper and write down a list of categories. Each category represents what you spend money on in a typical month. Your list will likely include things like the mortgage payment, cell phone bill, and gym memberships. Then add non-monthly expenses like oil changes and birthday or Christmas gifts. Oh, and dreams too – like vacations or that new drone helicopter you keep seeing on TV.
- Next, put a number beside each category. What is the single most important thing you must pay for every single month? Put a number 1 next to it.
What did you pick? If you are like 90 percent of my clients, you put a #1 next to the rent or mortgage payment.
But you would be wrong.
If you only earned enough money to purchase one thing on your list, then the item you placed the number 1 by is your TRUE priority in life.
Making the house payment but not buying any food for the family just isn’t a good idea. Food is as important as air – and is a lot more expensive! If you absolutely must pick one item over every other then food takes the #1 spot on everyone’s list.
Why wasn’t food your first choice? Because we always have food nearby. It’s in our refrigerators, down the street, and we could even pick the super-size or a happy meal at 2am if we wanted to.
You have just experienced the “A-ha” moment, a realization that we take things for granted. This exercise is going to create new neurological pathways that will force you to make even better decisions about the order of your money.
So, now that I’ve told you what the number 1 priority is, go down the list and pick your #2, then #3 and so on. Continue down the list until everything has a number and rewrite the list in order of priority.
Be prepared for some very deep and meaningful discussions when you do this exercise with your spouse. My experience is that women value making medical payments a higher priority than eating out, and men want to put the car payment above buying clothes. There is no right or wrong answers here – this is a kind of couple’s personality test.
Once you’ve re-written the list in order of priority it is time to write down the dollar amounts. The water and cable bills are easy – they don’t fluctuate too much. Be realistic and admit to yourself – as I have – that we spend WAY too much money on food (for you, it could be dining out or golf expenses).
Divide annual expenses, like life insurance premiums or car license tags, by twelve and put it down. Hey, it’s an expense and we don’t want to be surprised when it comes time to renew that magazine subscription or buy the Entertainment Coupon Books our schools force our children to push on relatives every year. If you expect to spend money on it this year then put it on the list with a dollar amount.
Now for the really hard part: Write down your anticipated take-home pay for the upcoming month. Subtract each item on the list until you either: A) Run out of categories or B) Run out of money.
I’ll leave the rest to you to figure out, or you can hire me for some couple’s financial coaching. The important thing to note is where certain categories end up on our list and how much of our income was spent on it.
As I mentioned before, we spend WAY too much money on groceries. However, my wife loves to experiment in the kitchen. While I would love to cut the food bill in half (my daughter would be just as happy eating mac and cheese every night) to pay our house off sooner, we placed a higher priority on my wife’s talent.
Now, if I could only convince her to cut the cable off completely…
We all have deficiencies in our money. There is always a more economical use of the Benjamins. We often ignore the truth and justify them with excuses. Let my budgeting process expose your spending weaknesses and begin to make changes where necessary.
Mint.com can’t do this for you. Quicken does not create deep and revealing money conversations the way this financial exercise does. It’s the Order of Money – and how we spend our money reveals our true financial priorities.
Steve Stewart is a husband, father, and long-time believer. For the past several years he has made it his mission to help everyday Americans learn how to pay attention – not interest. You can learn more about personal finance by following him on Twitter @SteveStewartMe or his blog http://SteveStewart.me/blog