Giving, Saving, Spending

The following post was written by NCN of No Credit Needed, one of my favorite personal finance blogs and probably the best blog on the topic of getting out of debt. If you're struggling with debt in any way, I highly recommend you check out No Credit Needed.

Years before I ever heard Dave Ramsey say it on the radio, a friend of mine said to me, "There are only three things you can do with money.  You can give it away, you can save it, and you can spend it."

Giving It:

I've been blessed with health, a good job, a great wife, and two awesome kids.  I believe that it is important to give, generously, to my local church, charitable organizations, and folks in need.  I never "give" so that I will "receive", but I "give" because I have "received".  (Personally, I didn't wait until I was debt-free to tithe.  In fact, "giving" is listed at the top of our budget and always will be.)

Saving It:

Before we got out of debt, I had a mini emergency fund of $1000.   Now that I am debt free, I have 12 months worth of expenses saved in an online savings account.  My wife is funding her pension through her work, I am fully-funding my 403b (with pre-tax dollars) and we are both fully-funding Roth IRA's (with after-tax dollars).  Finally, we are funding education savings accounts for both of our children.  For us, saving money is a priority.  I will FREELY admit that I know very, very little about investing.  So, I search the Internet for sites (like FMF) for information about investing and investment choices.  I primarily invest in index-based ETFs and Mutual Funds.  We have diversified our investments and we try to keep fees to a minimum.  May I suggest that you learn as much as you can about retirement accounts, investing, ETFs, mutual funds, stocks, and bonds?

Spending It:

Wow, the fun part!  Here is my sure-fire way to both spend money wisely and enjoy the purchases you make.  Use a budget!  Seriously.  It doesn't matter how elaborate your budget is or isn't, but you need to have some sort of system in place for managing your finances.  Personally, I'm the "nerd" in our family.  (Was there any doubt?)  My wife is the "practical one".  So, I write out the budget, set it on the table, walk away, then she makes the changes that she wants to make, and that becomes our "official" budget.  Then, when we buy something, we can enjoy making the purchase because it's IN THE BUDGET!  Think about it this way:  If you've already given away a portion of you income, saved another portion in your investment accounts, then all that's left is to SPEND IT.  So, go ahead, you've earned it.  Just make sure that you create a realistic, practical, reasonable budget that you can (and will) implement, follow, and enjoy.

Again, I'd like to thank FMF for allowing me to write a "guest post".  FMF, you ROCK!

Comments

[Cory]

Right now I just budgeting "by the force" instead of sitting down and making a detailed budget. The line of thinking is that as long as I pay myself first (Roth, 401K, emergency fund, etc.) then I don't need to explicitly budget my spending. I still track all my spending in Quicken, so I know what is going where. Is this a common approach or do most people "give every dollar a job?"

[Chris]

Cory, I share your approach. I fund my savings, allocate debt repayments, set aside sufficient funds for regular and irregular bills, and spend whatever is left over. Which usually isn't much! But I took an approach to tracking my spending and then adjusting my behavior to change how much money ends up going into each category, rather than writing a fixed budget and limiting myself to a dollar amount for such and such category.

[Susan]

This is a great website, very informative and helpful to one who was extremely naive and disinterested about finances as a young adult in the 70s. You can teach old dogs new tricks and I am living proof of that axiom. Keep up the posts, I read this at work daily.

[Jake]

I also share Cory's approach. I put a substantial chunk of each paycheck in a 401k and I have a savings account devoted to irregular expenses. I'm lucky that my budging for those unusual expenses is less complicated than it is for most people -- my pay structure at work includes an annual bonus that is typically 20% or so of my annual compensation. I stash 100% of this in my savings account, and it seems to cover my big irregular expenses (and serves as an emergency fund in the meantime). All my monthly/weekly/daily costs come out of my bimonthly, regular paychecks.

[Lord]

There is one more thing to do with money. Build with it. Like saving it is accumulating wealth, but like spending it turns cash into assets, but appreciating income producing businesses.

[james]

I learned to save from my parents. I learned to tithe when I became a Christian. Even some of the financial guru's says it is good to tithe.

Spending money is something "caught" from your parents & surrounding people. I think if we know how to spend well, i.e. spend when we can afford it, spending wisely, a lot of people will be in better financial shape. Many people don't spend well, therefore they can't save.

ed