The Washington Post wrote recently about a woman who has been selling her services at $185 per hour to help folks match what they make with what they spend. Of course she sells software to help people do this. And this past April the New York Times carried an article called "Stop Wasting Money and Finally Start a Budget." In it the author cites an online service that will help you track your expenses at a cost of about $80 per year. You don't need any of it. Figuring out what you spend, not roughly, but exactly, is not rocket science and doesn't require software.
In my late 20s when I had $140 in the bank and scary credit card debt I realized I had to do something. I bought some graph paper and set out columns of my fixed costs (mortgage, heat, electricity, auto and home insurance). Then I added a column each for things like car expenses, magazines, books and subscriptions, routine household expenses (from mousetraps to batteries), clothing, restaurants (including fast food and take-out coffee) and so on.
I forced myself to write down what I had spent under each category. After a week my inner accountant had emerged and I kept at it. By month six I noticed something magical: the act of tracking expenses had a feedback effect on my spending. My expenses in the categories that all of us tend to ignore (take-out food and coffee, a candy bar at a vending machine, impulse buying a shirt, or a magazine at the check out line, etc.) were going down, not because I wanted to deny myself, but because I could see what was happening.
At the end of that first full year those few minutes a day of what became compulsive recording paid off. It took me about a half hour to add up each category and then total it all (a side benefit became obvious when I had to do my taxes). Then I compared that total to my take-home income for the year and saw I was ahead, for the first time in my life. I decided to do a budget for the next year, using the past year's expenses as a guide. At the end of that year I saw I had come within 1% of my budget estimate. Passing that self-imposed test soon became an annual goal. Each year on December 31st, I see how close I've come to my budget estimate of twelve months earlier. Usually I come within that 1%, sometimes over but more often under.
Why do so few people do some version of the above? As with much human behavior the answer lies in a mix of rationality, rationalization, delusion, denial and the societal context in which we all live. Perhaps looking at some of the deeper reasons why people tend to spend beyond their means and then resist doing something about it, will help.
Our own society gives us both permission and encouragement to over-spend, beginning with president Trump - if he can push the U.S. into a record-breaking deficit why should we try to control our personal spending? From the U.S. government on down, many Americans live beyond their means.
In an economy built on consumption, a culture of shopping has evolved to encompass all of us. We are all consumers, but we do not act as isolated units; each consumer operates within a context of meanings and symbols; this is the basis of modern advertising, as is by now well-known. Consumption is a broader form of exchange than just getting a thing or a service in exchange for money. We also get deeper rewards, like love, warmth, and status. And shopping, psychologists and marketing gurus have long known, is addictive in the same way as marijuana or alcohol - the purchase of something new creates a mild high. These rewards are ratified by the ubiquitous credit card, where the message is you can have what you want when you want it.
The history of consumer credit, going back to the spread of installment plan buying in the 1920s, and on to the introduction in 1950 of the first universal credit card (a card that could be used in a number of establishments), is loaded with symbols and metaphors that give us permission to do something that goes against common sense - buying something that you cannot pay for. Before easy credit, debt was akin to a sin and people were raised to think that one had to save up to get something (remember "a penny saved is a penny earned"?) Significantly the plastic card we all now carry was named a credit card and not a go-into-debt card. And the word credit can even suggest something positive, as in the phrase "your behavior does you credit" or "she is a credit to her education;" there is an acknowledgement of merit, even honor. Thus you as a credit card holder are not only given tacit permission to go into debt, but subtly lauded as a fine person. Likewise, "buying" something conveys that you own it; it is yours, and by buying it you get many benefits, including keeping up with those who are richer than you. You too can own what everyone else owns, you do not have to deprive yourself or postpone your pleasure. Never mind that buying on credit technically means that you do not own it until the debt is paid off. In the meantime the credit card issuer has paid for it, not you.
It is not surprising then that credit card debt has been rising steadily since cards came into widespread use in the late 1960s and 1970s. The Federal Reserve did not track credit card debt until 1968 at which time it totaled $1.3 billion. In 2018, it had grown 770 times greater than it was fifty years ago, to reach $1 trillion, with the average U.S. household carrying over $8,000 in credit card debt alone (this does not count other forms of consumer debt such as auto loans). In short, over-spending is the norm - it is even patriotic since 70% of our economy depends on people buying things and services. And in typical American fashion, an industry has arisen to help people with their credit card debt. There are credit card debt counselors, credit card debt support groups, credit card debt consolidators and budgeting software, all of which of course adds more expense to one's budget.
As for my simple method, resistance to it begins at the most rational level. Many people think keeping such a spending record takes up valuable time, even though it does not. This fits into the widespread "I'm way too busy" syndrome; the common pattern of people feeling that they already juggle too much in their daily lives, which in turn fits with the growing presence in our lives of the internet, which has put most of us into a real-time pressure cooker. With real-time becoming the only kind of time for many people, there is little room for thinking about or planning for the future - which in a sense is what budgeting is.
At a deeper level it seems possible that most people really don't want to know what they spend; they are more comfortable in denial. Making or keeping a budget would threaten their illusion that all is OK. Running still deeper is how the symbolism of budgeting can affect one's self-image. Many people may think tracking expenses on a daily or weekly basis marks them as a green-eyeshade-wearing nerd, or worse, a life-denying, fun-hating, tight-wad skin flint. They'd rather be in financial trouble than risk that self-image.
For all these reasons most people will continue to overspend and resist any program to help them re-align their income with their expenses. At best we will see the same kind of bell curve we see with dieting and exercising. It's New Years Day, you're ready to start off well; you've just purchased budgeting software (which you put on your credit card), and you're determined to get things under control. But before things go the way they usually do - falling back into familiar habits - think about some of the reasons why.
