My Spending Weakness

Lifestyle inflation is the bane of existence for poor souls who are trying to get their act together and live below their means.  It is the tendency to increase your spending faster or equal to the increases in your paycheque. I know I suffer it at times, mostly related to fixing up the house.  You see I’m a home reno addict.  I can’t stop fixing up my fixer upper house.

Granted some of the repairs are required like a leaky tap or putting in some new flooring in a closet because the old floor is basically not attached to the subfloor anymore.  Yet other projects are completely for selfish reasons.  For example, new oak hardwood in the living room wasn’t required, but it looks very nice.

My greatest problem with these projects is they come in waves.  We will go for months without doing anything and then I’ll tackle four projects at once.  It’s murder on the cash flow when it happens.  So to help control this little spending weakness of mine, I’m going to create a new savings fund for home renos and put some cash to it each month.  I know that doing it makes this a rather permanent fixture in my budget, but on the other hand I will start to control the spending amount a bit better.  This way I will only start a project if I know I have the cash to complete it in the savings account.  I’ll be starting this up in May 2009 when the daycare opens again in the house (my wife is currently on maternity leave).

So how do you handle your spending weakness?  What have you found that works for you?

This post is now part of the 109th Carnival of Personal Finance.

13 thoughts on “My Spending Weakness”

  1. My simple answer? Marry someone who is frugal and nixes the unnecessary purchases I want to make. That worked for the SUV I wanted to buy 20 yr ago as well as the wakeboarding boat I wanted to buy 2 yr ago.

    The downside? Frustration over her being willing to spend 10’s of thousands of dollars for things she wants with the house (granite counter tops, professional landscaping, a steel storage building) but not for things I want for fun.

    I think your idea of a separate account is excellent and one I may adopt as I attempt to recover from the divorce coming down the pike.

  2. My weaknesses is travel and eating out. I handled each a bit differently:

    1) When I lived right downtown, we used to eat out every day. We didn’t necesarrily LOVE what we were eating but we were too lazy to grocery shop and cook. Now that we live a little out of the core and we live a 5 minute walk away from a great grocery store, we cook at home most nights. We go out only once or twice a week (once for a girls night for me and once out as a couple). And we go to places we really love and we enjoy every minute out. It makes it special.

    2) Travel: we look for the best deals, book way in advance, try to use Aeroplan miles for flights or fly out of Buffalo to save $. We allocate $10K each for travel per year, which is a lot, but since next year we will try to start a family, we figure that we will not be travelling until the kid is toilet trained. Once that happens, again, we’ll travel but more kid friendly travel so less exotic (shorter flights, etc). which should help keep things under control.

  3. I think my weakness would be the same as yours- home renos! It’s a budget line item for me. My wife (a project engineer)has tried to reign me in a little by requiring a full budget for approval before I start any new project.

  4. I have a feeling when we become home owners we will have the same issue of home related expenses, I’m not looking forward to it. I think it will be a fight between my wife wanting to buy and upgrade too much and myself trying to be too cheap and not want to constantly pour money into the place.

    The only way we will agree is if we come up with an annual budget. Our spending categories aren’t in separate accounts, but having the cash allocated each month we will know when we can ‘afford’ to buy or do something, and then just pull it out of whichever account as needed.

  5. I don’t buy it, but put it on a list. I review the list after at least a month. It is generally classified as “soon”, “late” and “maybe”. If I still want it after a month (we’re talking the soon list here), I start thinking about buying it and doing research. If not, I delete it. Some things can sit a long time. It sometimes happens that someone will freecycle something on my list and then I get it for free.

    But the “waiting-list” method rejects almost all of my unneeded purchases viz. after a month I realize that I don’t really want it anyway.

  6. MGL,

    That’s not a bad idea. Project approval and full spending plan before you get started.

    Jordan,

    It actually depends on what type of house you buy. If you go newer there is less to do. I buy older more run down ones because I know I’m going to want to change things anyway so why pay money to have paint colours and floors that I won’t like.

    ERE,

    Actually we wrote up a reno list when we moved in. Then ranked the reno’s by high, medium, low scale of what needed to be fixed and what we wanted to fix. We also put a rough cost to each item. So in two years we have mostly stuck to it. So just about everything I want to do to the house I still want to do after two years.

    Tim

  7. Great post .. you might want to read my article on Lifestyle Inflation 🙂

    My biggest weakness so far is having meals out. It’s no-where near as often as it used to be but still I’m doing it too much. It seems that these days though, eating homemade food is just so much nicer … and cheaper … so I think it’ll be an easy to break habit.

  8. It seems to me that we have a common dream of a Zero footprint house. The first mistake we all make is to look at our power bill and see if we can replace that with electricity.
    If we analyse how we use the energy of that electricity, we find that most of that energy is in the form of low level THERMAL energy. We can use water at 85F to warm our floors to heat the house, and the major other use is hot water at 140F. Both of these account for 75% of our electrical use.
    It is way cheaper to produce this energy with thermal panels, or Evacuated tube thermal collectors.
    We still want to keep our self cleaning oven so it is way more practical to be connected to the grid. Just put the lighting and Thermal pumps or fans on battery backup, or PV. If in a rural area, have the water pump on backup. Than we have all the comforts at low cost, even during power failures.

    With careful thought, Solar energy is really quite inexpensive.

    Roger.

  9. I, too, have a ‘house projects’ line item in the budget – actually TWO (one for ‘upgrades and repairs’ and one for ‘decorating and furniture’).

    It’s a great way to get a handle on those Home Depot budget buster trips! Actually, I’ve seen it that you should budget 1-2% of your house value each year for repairs and maintenence.

    Good luck with your projects!

  10. My mother’s ‘spending weakness’ was little things that added up to BIG money. I mean hundreds, and thousands of dollars of credit card debt.

    “Oh, look! This is on sale!”

    I have since then made a life time resolution to never let that happen. I pay off my credit cards every month, and I’m careful with what I buy.

    I have the same ideas about Christmas presents, because honestly nobody needs more junk to collect dust around their house. Take the time to buy them something they actually want, and they will be far more greatful. I didn’t say expensive – There’s plenty things people would want that are not costly.

    Instead of buying 40 $5 things with trivial value I’ll buy one $200 thing that I actually want.

  11. Well, what I would do is take a sober look and calculate how much money you will need at retirement to be comfortable. Then figure out how much you will have to save between now and, say, 65 years old to achieve that sum.

    Then compare it to what you’re actually saving. There are two possibilities; a) If it matches the figure, go ahead and remodel. b) If you’re not saving enough, stop spending any extra money except on very basic life needs until you can bring your monthly savings up and get on the right track. Eliminate as much spending as you can and increase your savings. If necessary and possible, increase your income.

    Considering your actual future needs can help give you a reason to stop certain spending habits. It could, in some cases, reassure you that it’s ok to spend on those things.

    For me, I need $2777 per month in savings to meet my retirement goal. I’m not there and need to increase my income while keeping my expenses level. So as a result I am only spending on basics until I can increase my income.

    I suggest trying a similar exercise and see how it works for you.

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