Money: Talk and Budgeting

One thing that consistently amazes me about this blog is how our collective knowledge far exceeds our individual knowledge multipled by the amount of people involved. It is probably a lot more like individual knowledge squared by the amount of people involved. One person knowing a bit about this part of the problem plus another person knowing a bit about that part of the problem leads to some truly amazing stuff.

I think we do ourselves a great disservice by not talking about money. Not so much on this blog because it is only somewhat in the range of the blogs topics but in our real lives. We will have no problem asking a family member or friend how they fixed that squeeky noise in their door or grow corn or how to draw and fire a pistol faster and more accurately but tend to avoid money like the plague. A friend who knows you steal whole boxes of printer paper from work and helped you bury that homeless guy you killed back in '03 won't know how much you make or what you do with/ to said money. You know he is fooling around with Suzy the waitress at the Bucket of Blood but don't have a clue what he is doing to prepare for retirement. It is sort of rediculous.

Why do we do this to ourselves? First of all talking about money brings up awkward stuff. It brings up the proverbial self worth measuring contest of how much you make and it can be embarrassing for those who make less and awkward for those who make more. It brings up all sorts of classiest crap also and makes us talk/ think about economic/ political values and beliefs.

I am not saying you need to ask a friend exactly what they took home last year or tell them what you did. More that we should benefit from each others knowledge/ experiences and mistakes when it comes to money. To be blunt we all have a pretty darn good idea what people make anyway if we know them halfway well. Your buddy the doctor probably makes a pretty good living and your cousin who is a marginally skilled  often unemployed 'jack of all trades' doesn't make very much.

Anyway moving on to my main point.

I find money interesting. It is interesting because  it is pure economics.  We have infinite desires and finite resources to meet them with. Of course you can work more or invent something or otherwise make more money in the big picture but between now and next pay day you have what is in your accounts right now. This means we all have to make choices and prioritize in some way. We need some sort of shelter, food and fuel to live a decently comfortable existence. We need to have car insurance to legally drive and not get hassled all the time.  We need to pay our debts (if applicable) to prevent all sorts of various unpleasant things from happening. After that it is smart to save for the future. Of course getting a couple beers and a burger out now and then is nice.

The main point is that no matter the perceived wisdom or frivolousness of a persons choices at the end of the day if they don't make at least as much as they intend to spend there are going to be problems. You might live in a McMansion and havve two new leased sports cars plus a wicked Keno habor or you might want to save for your kids college and pay off the house fast while buying 1oz of gold every month and go to that whizz bang shooting school and yadda yadda yadda. No matter the prudence or frivalousness of your intentions the income still needs to exceed the outflow.

This would be a great lesson for government at all levels to learn.

Wifey and I finally decided to get onto a real budget to keep our finances in a non messy situation. On the bright side we have been making more than we spend and saving the difference so things could be a whole lot worse. Wifey went to Mint.com and signed us up and we built a budget this afternoon.

I think having connectivity with our accounts is really going to help make a budget into a living thing instead of a piece of paper saying what we should spend on stuff. Also going in and categorizing every transaction will probably really help. Being visual folks seeing where our money is going compared to where we want it to go should really be good. I imagine that for the next couple of months our budget will change some. To a large degree we just wrote down our expenses and quantified what we had been sort of passively trying for up to now so it should be sort of close. However as we balance what we theoretically would like to spend with what we do spend and our desires there will surely be some adjustments.

Lots of smart financial talking head type folks say you should have a budget with every possible expense listed and decide where every nickel you make is going to go. I find this a nice idea but just not realistic. Some expenses are sudden (traffic ticket) or just not entirely 100%  predictable (electric bill, gas, etc). I don't feel the need to save on a monthly basis for the few times a year we buy someone a birthday present. Gee I need to save $2.19 a month to buy the nephews toys on their birthdays would just be a pain and coming up with $25 or whatever from time to time isn't going to make or break u. Some folks with lower incomes and less slack might need to plan for a couple months for a birthday and all year for Christmas but others do not.

My goals in budgeting are to increase visibility and cut out a bit of fat. Having almost 100% visibility of where our money really goes is going to help greatly in making decisions thereon. It will let us make smart intentional decisions instead of taking wild guesses. Also seeing how say,  a decision to save a  full 10% for retirement or whatever is going to affect the big picture will let us (from now on) make fully informed decisions instead of uninformed ones.

As for cutting out some fat I think identifying exactly where a certain % of our income goes will help. Seeing exactly where a problem occurs is generally a prerequisite to addressing it effectively. It is one thing to look at your bank statements and say "We are spending too much and have to cut back" but it is a very different one to see that you are spending twice as much as you planned on eating out or books or whatever the case may be.

I imagine this topic will be revisited in upcoming months.