Reactive Vs. Proactive Spending
Everything has its category. The endless bills- as vast as they are, can always be consolidated down into smaller categories. Buying groceries, eating out, stopping for coffee, convenience store runs and vending machine purchases all go in the food category. Car payment, gas, insurance, title renewals, tires and car washes all go in the auto category. Dental cleanings, eye appointments, insurance, buying glasses or contacts and chiropractic all go in the health maintenance category. The list goes on forever. Many of the items are non-negotiable and are necessary. We may feel like we have no control over them and when they decide to show up. This is true to a point. The truth is even though some things only come around once or twice a year we can still treat it like a monthly planned bill. This would mean in our auto fund we would budget the minimum needed to cover gas and the car payment, but we would also figure out how much our annual expenses are. Let’s say between insurance ($1,400), tires ($600), title renewals ($75), and oil changes ($75 x 4) we spend roughly $2,400 a year. This is always a hard bite to swallow when that once-a-year bill comes up. So instead of not thinking of it for 11 months and then on month 12 we are scrambling “borrowing” from every other category to cover it, why don’t we just divide $2,400 by 12 months and we start setting aside $200 a month into the auto fund. Maybe we don’t end up buying tires that year, so now we have $600 waiting to be used for the next “auto” emergency coming up (like replacing the brakes).
Tipping the reactive/proactive scale. Many times we don’t think of our spending habits as proactive or reactive. In reality, most of us are farther on the reactive side than we would like to admit. Those spur of the moment decisions to swing by and get take out, go on a weekend getaway, make that next 1 or 5 purchases on our favorite shopping website all leave us believing that we are “choosing” our purchases, but in reality our emotions are. Typically the most proactive spending we can claim to do is paying for our bare necessities; things like rent, gas, food, insurance, internet, and phone bills. Everything else is reactive. If you have the money to buy the rest of the “wants” then it still doesn’t hurt to still slide over to the proactive side and put some planning into the process. Price checking, waiting 3-7 days before deciding yes or no, saving up how much we need ahead of time instead of putting it on the credit card, and looking for used or free options before turning to buying brand new.
Creating a budget. Keeping a budget is one of those misinterpreted habits. Many believe that by creating and setting up a budget we are limiting ourselves and therefore our choices. Really it is the exact opposite. By having a budget that we follow and update regularly we are giving ourself more freedom of choice. We all know that a dollar that has no destination will wonder off into the “who knows where” land. This is why that $100 bill we had stashed in our “just in case” pocket of our purse, somehow is now only a $5 bill. Where did it go? We haven’t the faintest idea. If that $100 had a specific place to go it would still be there now. Maybe that was paying off a little more debt, or into an emergency fund, or saving for our next big goal. Whatever it goes to we know that it went with purpose and intent, therefore freeing us up for future choices (less debt or achieving our big goal).
Keeping the big picture in mind. As easy as it is to feel like we just arrived where we are all of a sudden, we know deep down we did not. Some of the debt in our life may have been from a large purchase or a big life event. But most of the time it added up slowly over the days, weeks, and months. Now years later we are still paying off our yesterday’s feeling like we can never get back to zero. This is how the power of habits can make a huge difference in our everyday lives. Starting with a mindset change we can stop the destructive habits we have when we spend money reactively. With some planning, budgeting, and stopping for a beat before making a decision we can slowly but surely turn our spending choices to the proactive side. Before you know it you will no longer feel like you have to say yes to please the salesmen, your friend, coworker or kids. Instead you can confidently say no, I don’t have the money to spend on that “want”, instead I am paying off my debt or saving for ______(insert your unique goal). By stepping back from the daily distractions we can focus on our bigger goals and see that we are indeed on our way exactly there.