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Save Money With a Personal Spending Plan


The Personal Spending Plan (PSP) you will develop will include your basic expenses plus all of the items you spend money on. How much do you really spend on eating out in a month? How about haircuts? And OK, 'fess up, how about clothing? Most "budgets" don't include everything, so it's thrown out after the first month because you're "over budget." As a past client once said, "Better no budget than to be over budget! "

The PSP will take the mystery out of where your money goes as well as address the “out of sight, out of mind” trap. It moves your finances from the general (also known as unconscious) to the specific. You may feel more comfortable with a "general" spending plan, but the phone company doesn't care if you just "generally" don't have enough money to pay your bill on time. They move into specifics very quickly and cut off your phone.

Once the mystery is revealed, I believe it will be obvious to you the appropriate actions to take and you'll even want to take them. And for a few of you, you'll even be excited!

For most people, budgets=sacrifice. That's one of the reasons I don't help people develop “budgets.” Instead, with this workbook you will find out the facts regarding your personal finances and your goals. Once you've prioritized your goals and determined a timeframe to accomplish them, you may, without any sacrifice, choose to spend your money differently.

Let's say you're planning a trip. From your calculations you can only afford to be gone five days. If you could be gone for ten days instead of five, just by not going out to eat twice a month, wouldn’t it be worth it? And who said anything about sacrifice?

By not going out to eat and saving the money you would have spent actually makes you feel good, because you are moving closer to one of your identified, prioritized goals. Who ever thought not spending money now would be so much fun?


And let's talk a minute about the anxiety and strain you put on yourself and your family by lacking clarity about your financial condition. This anxiety and strain can take many forms, from worrying about how to buy new school-clothes for the kids to never feeling really OK about spending money on something you really want to do or have.

Or are you the person who spends money, knowing you don't really have it to spend? Any of these can be addressed by the development of your PSP and your commitment to make it work. Just imagine how your personal effectiveness, your health and your sense of well-being could be enhanced if you weren't worrying about your money!


Speaking of commitment, let's stop and look at your commitment to being in charge of your money. I don't mean to imply that by developing a PSP and setting goals, your credit cards will magically be paid off and you'll suddenly have thousands of dollars extra to invest. Au contraire! This process you are embarking on takes commitment and work.

For some of you, lots of it. It may mean doing things you've never done before, like balancing your checkbook or paying your bills by the due date, not after. Just as with any new undertaking, it takes practice until your new skill is developed.

And it takes your whole-hearted commitment to keep doing what needs to be done even when you don't want to or when it would be easier to wait until tomorrow to pay your bills instead of paying them today. But with your commitment and practice, you can be in charge of your money and can realize your goals.

At this point, I’d like to give an example of a client, with whom I worked a few years ago. At the time of our first meeting, she was renting a house, had no car and had charged three credit cards to her allowed limits.

The amount of money she made left her only enough to make the minimum payments on the credit cards (and you know how long it takes to pay off a credit card when just paying the minimum amount, not to mention the amount of interest she was paying every month!) She was in tears and certain that she'd never be able to pay off her bills -- much less buy a car, both goals which were very important to her.

But her commitment to her goals was striking, even though she had no prior success in moving toward them. In fact, each month she did just the opposite because she kept charging on her credit cards. In the process of developing her PSP she committed to not charging on her credit cards and spending according to the plan. She left a bit scared, but determined.

Recently I was at home and heard someone honking outside. I looked out and, sure enough, here was the same woman, crying again, but sitting in her new car. She had paid off her credit cards and bought her car! She is an inspiration and an example of what can happen once your goals are clear and your commitment is strong. And what is she working toward now? Yep, you guessed it, buying a house.


I suspect that some of you who are married or have a committed partner, are thinking that your financial problems are "their fault." If only they wouldn't spend so much money on clothes or ski equipment or whatever. Then you wouldn't need to develop a Personal Spending Plan and everything would be fine. Right?

Over the past eight years I have counseled many couples. In almost every case their financial

difficulties fell into one (or more than one) of the following categories:

1. No personalized spending plan at all.

2. No agreed upon personalized spending plan.

3. No clearly defined short, medium or long-term financial goals.

4. No agreed upon, clearly defined short, medium or long -term financial goals.

5. No structure set up to carry out what's been agreed upon.

6. A lack of commitment on the part of one or both partners to do what it will take to reach the financial future they have envisioned.

I have met with all types of couples -- the wealthy attorney and his wife, the couple with the woman as the main wage earner, and the professional couple who had a great marriage except that the only subject that would always start a fight was money. All of these couples benefited from a PSP.

This workbook will help ensure that your PSP is developed and agreed upon. It will also ensure that your financial goals are agreed upon and structure is put in place to accomplish them. At long last you can stop blaming each other and, with your mutual commitment, move toward your personal financial goals.


Before we begin, I want to acknowledge you for arriving at this point. In our society I think the only subject that is more taboo to talk about than sex is money. And yet, no one teaches us how to develop a personal spending plan or how to balance a checkbook or even warns us of the pitfalls of credit cards. We learn what we can from our parents, but depending on their skill level and spending habits, they might not have been the best role models. After all, no one may have taught them either. But we're expected to know how to manage our money, and if - God forbid – we don't know how, or have gotten ourselves in over our heads, the last thing we want to do is to talk to anyone about it.

Sure, the cool thing to do at parties is to pass on the latest stock tip or brag about the high return we're getting on our investments. But if you haven’t balanced your checkbook in three years or you don't have any money to buy school clothes, much less invest, these conversations leave you uneasy and feeling like there is something wrong with you.


You either haven't been taught how to manage your money, or you haven't committed the energy to do what it takes to develop your PSP and follow it. So congratulations on using this workbook and taking the first step toward managing your personal finances.

Now let's begin.


The first thing we need to do is get the facts. Who do you owe, how much and when is it due? Simple, huh? And what else do you spend your money on? Like eating out, dry cleaning, books, videos, etc. Use the following sheet(s) to write down the amounts and dates for everything, you spend money on in a month.

Once you've written down every thing you can think of, go through your check register for the last three months and see if you've spent money on anything you haven't accounted for already. If you find something, add it. If you don't use a check register, don't worry, just do the best you can, you can update it later. Remember during this process, don't edit or not put something down because you think (or are afraid) it will be more than you make. At this point we just want the facts.


As we begin to gather the facts, what may begin to surface are your emotions and feelings about your financial situation. Some of the typical ones are:

a sense of failure

resentment and/or anger toward your spouse/partner or parents

resignation that it will never work out or get any better

sadness about how you've handled your money in the past

anxiety that you will never have enough money to pay your current bills, let

alone have enough for retirement

frustration with the system (i.e., taxes)

excitement about the possibility of attaining your financial goals

hope that it will all turn out

satisfaction that what you've done to date has been right on track

There are many more possible things that you may feel as you proceed and any and all feelings and emotions are fine. As I've mentioned, over the many years I have used this workbook, I’ve seen and heard it all. The topic of money for some people is upsetting and it's fine for you to express yourself completely as you go along in this process.

But for now --- what are the facts?


Now we come to the fun part--at least fun for some, and gut wrenching for others. Time to add up the total amount of debt you have and your total monthly expenditures. During this time I always remind my clients to breathe. However the numbers come out, remember they are just facts--what we're going to use as the basis of your Personal Spending Plan. They're not set in concrete and they don't mean that you are a good or bad person. And most important , there are no right answers. What you spend on groceries is what you spend on groceries based on your personal situation. Who cares what the Joneses down the street spend?

Take a minute before you actually do the adding up. Without looking at the “Just the Facts Sheet,” guess what you think the totals will be. Some of you know these numbers by heart. But for others, discovering how much you spend and on what, versus what you perceive that you spend, will be a total shock. This reality check is a perfect example to show you the difference between your thought s and feelings about your money versus the facts and this is a very important distinction to remember when dealing with personal finances.

So go ahead, add 'em up, and remember to breathe.

Once you've added it up, don't make any decisions. And if possible don't panic if the total was more than you currently bring home. This is just the first set of facts we need to develop your PSP.

Now – onto your financial goals.


The next thing you need to determine (and, if you are a couple, agree upon) is your financial goals. What are your immediate, short-term and long-range financial goals? Chances are you can come up with 3-6 financial goals off the top of your head without even thinking very hard. These are the goals you want to accomplish and don't know how or the ones you think you should accomplish and just haven't gotten around to yet. And then there are the ones that would be fun to accomplish and provide you with immense enjoyment.

Some examples of financial goals would be:

Paying off all credit cards

Buying a house or new car

Fully funding an IRA yearly

Having 3-6 months' salary in an emergency fund

Buying life or disability insurance

Saving for retirement

Setting up an educational fund for your child/children

vacation in the Bahamas

As with any goal setting exercise, use this opportunity to write down obvious goals as well as brainstorm any that are lurking beneath the surface. These take a little longer to come to the surface, so stick with the exercise. Most importantly, don't edit, just write. Now take 5 minutes and write down your financial goals.


My clients always ask me to define immediate, short-term and long-range. I'd rather you put the timeframes that make sense to you for each category. Six months may mean immediate to you and short-term for others. Remember, this is your PSP tailored to you and your situation. So next to each category above, identify the timeframe.

Now, time for the really fun part, putting it all together. But before we do, let's review what you've accomplished so far:

1. Identified (and adjusted, for some) total monthly expenditures.

2. Identified and prioritized your financial goals.

3. Allocated a portion of your net income to the accomplishment of your financial goals.

Take a moment and realize what a ma or accomplishment this is. You've done what you know you should do, but never quite got around to doing. Or you never knew quite how to do it. Well, you've made it this far - so congratulations! Now to put it all together in your Personal Spending Plan.

One of the major problems most of my past clients have had (even if they've gotten to this point) is how to make it work on a daily basis. Usually they get paid twice a month or every other week and the majority of their bills are due by the 10th. Sound familiar?

Have no fear-there is a way!


Even though this is the last chapter of the workbook, it really is the beginning for you and your financial goals. You know where you are, where you want to go and have a plan to get there. And this is a process that you can use over and over, as facts change and old goals are accomplished. I've used this process over and over with all my clients and it works. The thing you have to remember to add is your commitment, your tenacity, if you will.

I started setting financial goals for myself at an early age. I grew up on a farm in the country seven miles from Loveland, Colorado. There weren't neighborhood kids to play with, so my entertainment was what I generated. At the ripe old age of 9, I decided I wanted to buy a stereo. (I've since learned from my friends that when they were 9 they were spending all of their allowances on candy, not saving for a stereo.)

But I was determined and I knew the one I wanted. It was in the appliance store where my mom bought her washer. It had a receiver, a turntable, an 8-track player (I know, I'm dating myself) and the best part was the speakers. They looked like sleek end tables with slate tops and they had a speaker on each side, so no matter where you were in the room, the sound was aimed at you. They were very cool.

My only sources of income were my $1.00 per week allowance and money I received as presents. I saved for over a year. I didn't spend a dime and always asked for money for presents. At long last I had the $163.00 saved to buy my stereo and those speakers!

I'll never forget the day when we went to the appliance store. My mom told the salesman I wanted to buy a stereo. He asked me which one and I pointed to it. He then asked my mom how she wanted to pay for it. She said, "I'm not buying it, she is." His eyes then popped out as I brought out my wad of carefully folded $1, $5 and $10 bills

I've set many other financial goals since then and accomplished many of them. And I know that with a plan and your commitment, you too can buy "the stereo of your dreams."

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