Sunday, June 8, 2008

Small (and large) ways I disrupt my spending plan

As I wrote last week, I had purchased several personal care items from since they were cheaper than I could find locally. Combined with a virtual coupon and the ability to submit part of my purchase to a Flexible Spending plan, I could save nearly $50 versus locally purchasing these same items at the same quantity. However, this purchase took more money than the category "Personal" had allocated. This means I have to borrow from my savings account to pay the credit card bill when it arrives. In this fashion, I have blown my budget out of the water in a big way. Yes, this savings will show itself over the long run, but in the short term, it is a large chunk that needs to come out of savings rather than my spending plan.

Smaller ways I disturb the ordered nature of my spending plan: using other categories. For example, I visited a friend in a nearby city where they were having a city-wide garage sale. It was a nice way to spend time together, find some good deals and visit the local plant sale that was happening that same day. I purchased $0.70 worth of children's books to give to a friend's baby (subtracted from my "Gift" category), spent $1.00 on four pieces of women's clothing (easily part of the "Clothing" allocation), four tomato cages for $1.00 (subtracted from my "Miscellaneous" category) and a $2.00 book on quilting (from my "Entertainment" allocation). I did not need another book on quilting since I have not been doing much to pursue this craft recently, but decided to get the book anyway since it had both techniques and patterns. Subtracting $2 for a book from "Entertainment" may or may not be what others consider entertainment, but my "Miscellaneous" category does not have much left this month.

In addition, I purchased ten wooden hangers for $5.00, a pretty good deal. However, from what category do I subtract this amount? As I just mentioned, "Miscellaneous" does not have much funding left in it ($4.81 before visiting the garage sales). Because hangers are used to hang clothing, I decided to subtract the $5 from my "Clothing" spending. It is related and some might argue this is the correct use of my "Clothing" money, but the money in the "Clothing" category is just for clothing. So, rather than owing myself money or borrowing from savings, I chose to execute some category slight-of-hand and remove the money from my "Clothing" allocation.

Doing creative accounting like this may not seem bad, but performing this recategorization on a regular basis with $5 here and $10 there can really add up to overspending. My spending plan helps keep me on track, but using other categories like this indicates I am not living within my means, even if it is just in a single category, and the excess money in another category is spent rather than saved for the future. This analysis points out a flaw in my plans and reminds me to ask myself "Do I really need this item?" before purchasing it.

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