Mastering Your Spending Once And For All

The toughest part of most people’s spending plan is mastering discretionary variable spending.

Discretionary variable spending is spending on stuff and activities that vary and that we want but don’t need.

This is where alot of the fun happens.

Eating out. Movies. Travel.  Entertainment. Shopping.  Mementos. Hobbies. Gifts. Home Furnishings. Toys. Cable. Electronics.

So, how do you ensure you aren’t spending more than you want to, but are still doing the things that matter to you?

How do you strike the balance in your habits and stay on top of your goal without becoming neurotic about it or, worse, having it become a wedge between you and family, friends, and colleagues?

Well, give this a try:

1. Write down your take home pay

2. Subtract your fixed ‘must haves’ (aka nondiscretionary costs)

This will include things like mortgage, property taxes, insurance, utilities, internet service, cell phone, dog food, dry cleaning, monthly savings, IRA contributions.

3. The balance is what you have for groceries and discretionary variable spending. (I group groceries with discretionary variable spending because it has such a high frequency and because discretionary activity can be hidden in ‘grocery’ shopping.)

4. Divide #3 by 30.

5. This is how much you have to spend, on average, per day.

So, with this amount, you now have the immediacy of applying, on a daily basis, your spending plan.

Spend 3 times the amount of your daily amount all in one day? Then you cut back for a couple of days to make up for it.

Spend 1/3 the amount in one day? Then you get to carry the balance forward, or apply it to prior spending.

This method helps to underscore the power of spending habits and of delayed gratification.

It also mitigates feeling discouraged or overwhelmed at looking at how much you spend the end of every month.