What Would Happen if You Plan and Budget for All Spending

by David@MoneyNing.com · 8 comments

UH2L‘s comment sparked another idea on slowing down the mini David in me that likes to splurge.

So when I want to buy nice things that are somewhat expensive, I plan ahead and I budget.

What would happen if we stop buying everything from now on when we want them and instead plan and budget for it? Want that iPod? Allocate $100 a month towards it with your future paychecks. A shiny looking knife set? Gotta have a plan first.

The idea is simple. Instead of buying something on the spot, you simply delay the purchase by putting a plan together. You would still buy it, just after your future income arrives.

Thinking about this a bit, I see some amazing benefits:

  1. Makes You Wait – As you know, most of what we buy are based on impulse. By delaying the purchase, most of what we really “need” might not even be necessary in a few weeks (or months).
  2. Overspending – It’s much harder to over commit your spending (with credit cards or not) because you aren’t paying for something without the necessary funds. You won’t be caught off guard in a month when your bills finally come knocking on your door.
  3. More Workload – Once you implement this idea, there will be more work with wanting to buy something as there’s actually “work” involved. This has a negative psychological impact to spending in general, which helps you not want to buy (this is the same idea, only backwards, as the positive influence of saving money).
  4. You Don’t Decrease Your Savings – I really like this benefit, since planning for it with future income means you won’t dip into your savings for purchases. The savings might not go up, but the trend long term is still pointing the right way.

Pretty cool huh?

Of course, in order for this to work, there are a couple things to keep in mind.

  1. Discipline – You absolutely need to carry this through. It will be hard at the beginning but it will pay off big time if you stick with it. As with anything else, it will also get much easier once you are used to practicing it.
  2. Do It for Everything – Now that I think about it, forget whether it’s a necessity or not and just implement it for everything unless it’s time sensitive (supplies running out, or emergencies like a flat tire for example). Put everything you want to buy through this system and you will know whether they are really needed or not pretty soon.
  3. Never Hurts to Try – As far as I see it, it doesn’t hurt to give it a go.  Just make sure you don’t tell your loved ones that their gift is coming in six months because you read this article. (Note that if you already told them and they egg the screen, remind him/her that it’s the monitor that gets messed up and not this site).

Your Turn

What do you think about this idea? Is it viable? Do you already practice it and what are the results?

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{ read the comments below or add one }

  • Barb says:

    When we had more money and a decent savings account (back when our jobs paid more) we always made sure we had double the amount in the bank of any item we wanted to purchase (furniture, especially). It seemed like whenever we wanted something, and bought it, something else would break and need to be replaced. Now we don’t have much in savings and have to live closer to paycheck to paycheck (due to job losses and career changes). So, if we want something, I tend to buy a gift card for amazon to save up for it and stick it in a drawer. Keep buying them in $25 increments when I can, until there is enough money to buy the thing my husband or I want–buying these gift cards from our local grocery (Kroger) also increases full points for us to save money on gas–Kroger will give us 4X the value in fuel points for gift cards purchased. Sometimes by the time we have enough cards saved up, we no longer want the item and buy something we need instead. We also do this with coinstar….all the change we save we can get e-certificates for amazon (and coinstar doesn’t charge a fee when you get an amazon e-card) and save up until we have enough for what we want. Learning to live on about 1/2 of our income from 14 years ago, and with 2 kids (that weren’t here 14 years ago) is definitely challenging, but we are doing the best we can.

  • Dominique says:

    I think it is a great idea to. I am restraining myself to splurge on big items on impulse and factor in the possibility of getting the item ( Ie a 2nd car) with the running cost and reduced savings because of it and decided to wait till the prices were more favourable or when I reach my buffer range in savings first.

  • Meaghan says:

    I think this is a good idea. Right now I have just been working on tracking my spending in a spreadsheet to see where my money is going (clothes, groceries, gas, entertainment, etc…) Now that I have a general idea of what I spend, I like the idea of planning and budgeting ahead (and cutting that budget as time goes on to save more).

  • Christina says:

    I like the idea. Any suggestions on practical implementation? Tracking, and such.

  • marci says:

    Just because I have the money to buy something doesn’t necessarily mean that I should just go ahead and buy it. Therefore, I put the item I ‘want’ on a list inside my kitchen cupboard, with a date on it. If in one year, I still ‘want’ the item, then I’ll buy it. It makes me really think about whether this is something that I really want, or if it was just a passing fancy. And sometimes, the item shows up for next to nothing at a garage sale in that time, or appears as a handmedown from a friend or family member, or as a gift. Such as I wanted a fancy multi CD disc player for my new-to-me truck that only has a radio in it… Well, it showed up as a birthday gift from my parents when they found out I had put one on my list and was looking for one for later on in the year 🙂 Thanks.

  • UH2L says:

    I’m flattered and glad that my comment inspired this post. I should clarify that because I’m a saver, I always have the money to buy most major purchases, so I technically don’t have to wait to accumulate the funds, but I do monitor how much I’ve been spending recently and I make sure I haven’t lowered my savings account balances too much.

    Also, using the credit card with the most recent closing date gives me more time to pay it off, and I get my purchased goods earlier while my money earns (minimal) interest. That’s a tactic I learned from my dad. He had 5 or 6 credit cards and would use the appropriate one, never buying more than he could afford to pay off.


  • Craig says:

    I try to do this for a degree with some items, helps keep spending discipline for myself and prevents me from buying too much at once. Some items I do the reverse. For example, concert tix I need to buy right away or else they will sell out. I know they are expensive so might have a low key night or two after I buy them to make up for the money spent.

  • melixine says:

    I have been wanting the Wii Fit game for some time now. But as most things beyond my budget I ask myself where is the money coming from before the purchase and plan accordingly. I price comparison shop during this time and figure out the best way to maximize the purchase (ebates, coupon/discount/in store/online?) At the start of the year I created an ING Coupons/Rebates account and said when I hit the $90 mark I would go for it. Well, I hit $84 this weekend (using coupons/rebates/Ebates since 1/1/09) and things have changed.

    This is not the first time this has happened but waiting for something really makes you reeavalute. Now that it’s within viewing distance, thoughts have changed.

    Know I want to know to just how much can I save in 1 year. I’m an avid user of coupons, etc but never quantified the savings. This will be fun. More fun than the game. Now the question I’m struggling with is what to do with the money at the end of the year. I’m thinking a blow out grocery shopping/restocking in January 2010. This will be a nice way to reducing the food bill for at least 3 months and help to stock for the colder months when everyone is home and no one wants to go out. Combine that with my crock pot and I see a nice winter ahead (as soon as we finish this one).

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