Dealing with finances and money isn’t always a walk in the park. It would be nice to be someone that doesn’t have to worry about the money running out, have no worries about the consequences of spending too much, worry about how to cover bills until the next paycheck, etc.
Well friends, the point of this challenge is to lessen that burden, to lessen that stress and to lessen that worry. But don’t get us wrong, you will always have a spending limit no matter how financially free you become. There is always a point in which the money will run out. But it doesn’t have to be a worry with the right planning and having a frugal mindset, even when you are in a much better financial situation.
We just wanted to remind about the reality of this because it will take work and sacrifice to get to where you want to be! Along the way, we hope you will pick up permanent habits that will lead to a lifetime of healthier financial choices and practices!
And that is just what this week’s task is – one that will help you make sacrifices to help you reach your goals a little faster, but turn into a lifelong habit no matter your fiscal situation!
It is called – Your Spending Threshold!
What is a spending threshold?
It is a predetermined, set amount of money (the threshold) that requires you to call your spouse when a proposed purchase will exceed that amount. And during that phone call you can discuss whether that purchase would be enough of a benefit for your family to spend that money – essentially helping you think through a purchase and not later face the regret of wishing you hadn’t just hastily made it. Basically, it is a checks and balances. It is simply a step that will help you be very conscious of your spending and help you not overspend. It will keep you on track and in balance…literally.
Here’s how this works:
Sit down with your spouse and based on your current budget and your goal determine an amount of money that you are free to spend without checking in. Any purchases beyond this amount would require a check in.
When we first started this, don’t forget that we were nearly a week away from bankruptcy and so we set our spending threshold really, really low while we were in the thick of paying off $100K of consumer debts. In fact, our initial spending threshold was $5 (again – desperate circumstances called for desperate measures). If either of us wanted to spend more than this amount on something, we would just call and say “hey, I found a really good deal on shoes. They are on sale for $10. Do you think I should get them?” This allows you to verbally voice your spending justification, which we have found sheds new light on it. It allows your spouse to weigh in on the decision and walk through the reasoning why. For example, I admittedly had (have) a shoe obsession. Well, this spending threshold practice actually had several checkpoints:
1. The fact that I only have $5 to spend how I want.
2. The fact that I would have to call Alex at all would be a stopping/check point.
3. But if I did end up calling to get his thoughts, he might gently remind me that I have loads of shoes already (in this example) and probably need to get rid of many that I had anyway.
So then $10 (in this example) would be saved!
This works both ways as we have tendencies to spend money just because we see a good deal, just because there is a sale, and just because! This helps you to be more accountable to each other.
Now today, we still have the spending threshold rule. But it is no longer $5 now that we are out of consumer debts, it is $50. I actually love this as it is a protection in many ways. For example, when a salesman comes to the door – I need to check with my hubby. I attend a sales party at a friends house, I can buy a minimum amount of stuff, but the big purchases – I need to check with my hubby. An online sale just seems to good to be true – I need to check with my hubby! It really saves me so much money – same for Alex! It also prevents both of us spending a bunch of money without checking with the other, just to find that together we spent more than we had in the account. We actually know and have heard many stories of married couples both making a big purchase without checking with each other and causing bounced transactions (and this is in families with dual, significant incomes!)…which lead to a whole host of fees and issues. It’s a natural way to avoid that problem too!
Your task this week
The challenge and task for you this week is to set a spending threshold that is reasonable and help you work towards your goals at this point, knowing that you can change your spending threshold when your finances change as well. But keep in mind that we really want to encourage you to always have a spending threshold set!
For those not married
If you don’t have a spouse to run purchases by, then set up a spending threshold in your own mind. Ask yourself these questions:
- Do I really need this?
- How often would I use it?
- What value is this going to give in my life or is it just going to take up more space?
- Is this really a deal of a lifetime or can I get a similar deal in the future?
- What will I be sacrificing or delaying in terms of my goals if I make this purchase?
The point of this exercise is to be very intentional about those non-budgeted purchases and so someone that may not have another person to be accountable against can still implement this “checks and balances” type of process. Sure, it may be more challenging, but its not impossible. The important thing to remember is you can do it!
What this isn’t
Finally, we hope you don’t think we mistrust each other in the area of our finances – or that we encourage you to mistrust your spouse either. No! What we are doing is trying to find real, simple pragmatic ideas to help you and your family be better with your finances. We all know that a little accountability goes a long way. And sometimes when we are out shopping, that accountability is a great thing to help us be a little more mindful about our budgets.
We all have heard stories (or even know personally) of “buyer’s remorse” especially in reference to purchasing a new automobile. What we are trying to do is decrease that same “buyer’s remorse” that can occur even with the smaller ticket items.
So think about it and even try it. We hope you see that this is just another tool to help you reach your financial goals – just another baby step to help you where you want to be!
Need to catch up? Come join us on this challenge from the very beginning by clicking on the 52-Week Take Back Your Finances Challenge and sign up to start receiving your automated challenge from the very beginning!
One final thing…we also have a Facebook Group where you can engage in discussions, receive encouragement and talk to others that are participating in the challenges too for more ideas! Head to the Be Intentional with The Thrifty Couple Facebook Page HERE and ask to join us there! You can also invite friends and spouses too!
Disclaimer: We are not licenses financial planners. We are only a couple that have been just a hair-breadth away from bankruptcy and found our way out of debt with a goal to now help others. Please make sure to consider any advice given on our site and in this challenge as tips we have used ourselves; they may not work for everyone. If you have questions please make sure to contact a licensed professional.