Do you spend money without a plan?

By Stew

Why are personal finance professionals so focused on budgets? Because a budget is a plan for spending money, a written record of spending and the consequences of that spending. A budget provides accountability for the money that flows in and the money that flows out.

One of the worst financial habits that a person can have is the habit of spending money without a plan. This is the reason why credit cards can be such a trap – it is so easy to spend a couple of extra dollars every time that piece of plastic gets run through the machine. If I go shopping with $10 cash in my pocket, I can only spend that $10. If I go to the store intending to spend $10, I often walk out having spent $11.40 or $12.75 or even $15.38 without really thinking about it.

Luke 14:28 says:

For which one of you, when he wants to build a tower, does not first sit down and calculate the cost to see if he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who observe it begin to ridicule him,saying, ‘This man began to build and was not able to finish!’

Jesus used this example to illustrate the decision that a person must work through when he is deciding whether or not to follow Christ, but the ancillary principle is clear: do not spend money without a plan. When are you most tempted to spend money without a plan? People will always spend more money:

. . . when going out to eat without a specific restaurant in mind. It is bad enough to go out to eat in the first place, but if you just get in the car and start driving . . . We always try to have a coupon and a specific destination in mind.

. . . when taking a vacation without planning ahead. Plan your vacation around “deals”. Lay out your possible schedule and try have coupons ready or know which restaurants are having “kids night”. Book your hotel in advance through a discount hotel aggregator. Check to see if entertainment venues have certain days when prices are reduced. Pack a few snacks in a cooler . . . maybe  you can skip a meal now and then.

. . . when enrolling in college without considering all of the options. Do not wait until the last minute to apply for scholarships. If you choose to attend junior college (a wise financial choice), be sure that your course of study includes a lot of classes that will transfer to the next level. Choose a college that is located in an area with a lot of part-time job options and start saving for college when you are young.

. . . when when grocery shopping without a plan. Be sure that you are not hungry and have a little food in your stomach. Make a list and stick to it. I have made both mistakes more than once.

. . . when going Christmas shopping without an idea of what to buy and where to get it for the best price.

. . .  when logging on to TigerDirect, without having a reason. Maybe this one is just for me, but that is not a good website for me to just wander around without a purpose.

Get the point? Plans can always be changed and adjusted, but not having a plan in the first place can cost you double.

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4 Responses (including trackbacks) to “Do you spend money without a plan?”

  1. tmgbooks Says:

    I could not agree more! I am a personal coach. My specialty is working with those who are living paycheck to paycheck and want to stop doing so.

    Working with clients, I always begin by documenting where they are presently spending their money. Without that documentation it would be impossible to get on the right track!

  2. Kristia Says:

    Unfortunately, we have had to learn the hard way. Spending money without a plan not only causes financial stress, but it can also put a strain on the marriage. Prayerfully, my husband and I are on the right track; with a budget in place.

  3. Sharon Says:

    I never use credit cards. Sure I have taken out loans to buy items such as a car or washing machine but I find this easy to micro manage. Credit cards seem to be a different ball game when it comes to responsible personal finance. For some reason there is always a reason with a credit card to spend that little bit more as you mention in the above…

  4. Bobby J Says:

    it’s true what they say…you do learn the hard way sometimes. I for example, have learned the hard way that it is more convenient for me and my wallet, to walk around with a certain amount of cash in my pocket. Only enough to spend on something that I might need while I am out on the street. It has happened to me before that I walk around with 50 bucks instead of 20 and end up buying things I really don’t need. I say if you are leaving the house with some cash in your pocket, its best you have a plan as to what you will use that cash for. All the tips discussed by Stew are definitely very helpful ones.