http://www.billmackay.net/blog/index.php http://www.billmackay.net/blog/index.php?entry=entry100808-141140
The cultural shift between the two is well underway.

With boomers at the door to retirement and Gen X and Y adopting their
parents’ luxuries as basic needs, traditional budget categories are obsolete.

What used to be basic needs (which I label as Body Basics) consisted of food, clothing, and shelter. These needs have been gradually expanding and now include things many in the prior generation could not afford regardless of what you called them.

A survey by MainStay Investments identified these as basic needs:
An internet connection …84%.
Shopping for birthdays and special occasions …66%
Pet care…51%
Annual family vacation…50%

Note that those surveyed were in the 45 to 65 age range and the implications for budgeting and preparing for retirement.

So where would you list these in your budget if you had to?
It’s certainly not in the basic three categories of food, clothing or shelter.
Nor is it in any other category considered to be acceptable budgeting.
Surely they can’t all be “Other/Miscellaneous”?

But forget the glitch about the categories for the moment.
The real problem is simple; what you can’t measure you can’t manage.

To measure your spending on these and many other “new” needs
as competitors of your saving, you do need a system of some kind.

Some trade-offs are also required here as your needs and wants
battle for the disposable dollars you have available every month.

Whatever newly minted luxuries adorn your pre-retirement lifestyle
sustaining them in retirement demands that you cut back on some of the
‘old’ needs and wants that have faded in importance.

Spending less on them now may just be enough to make the difference
in your ability to afford these other “new needs” for a comfortable retirement:

Weekend getaways…46%
Professional hair color/cut…43%
Children, grandchildren’s education…42%
Dining out…38%
Domestic travel…35%
Ordering takeout…34%
Movies…30%

Identify for yourself the shift in the battle between needs and luxuries
as your attitude and motivations are transformed by the times. Then be sure to budget for them, too.

Copyright 2010 William M. MacKay











]]> http://www.billmackay.net/blog/index.php?entry=entry100718-193231 because the next ten to twelve years look like much more of the same.

Low job creation, home values, and consumer spending.
High unemployment, foreclosures, and taxes.

Doesn’t look like much fun any way you cut it.
Following the experts advice to save more, work longer,
and reduce your standard of living are grim reminders of a stalled economy.
All pursued, of course, to protect your standard of living later.

The nasty conclusion is what most of us at midlife are trying to avoid:
we will run out of lifestyle before we run out of money.

In other words we will reduce spending on the fun stuff
to stretch what little we have over the duration of our retirement.
I for one am not prepared to have less fun after the last few ugly years.

I will certainly cut back but not on my passions.
Those dream delights are what makes it all worthwhile.
Without these there is an emotional poverty that no future security can buy.

So how do you cut back and still enjoy the best in life?
Being frugal and spending less on the trinkets and trash is no sacrifice, right!
Can you live with a lot less $60 restaurant meals. Yes indeed!
Will you get all choked up having to buy private label Balsamic Vinegar? NO!
And it won’t ruin Christmas if you sleep in and miss the Boxing Day Sale. Really!

So let’s pretend a consciousness of abundance but be clever about it.
Spend on what you value most and give up what you value least.
Surely even the most irrational consumer can see the logic in that.

Copyright 2010 William M. MacKay
]]> http://www.billmackay.net/blog/index.php?entry=entry100711-193601 You ignore your spending habits at your peril.

The process of analyzing your spending is simple.
So simple perhaps it’s the reason you ignore it.
How can anything that is so easy actually work
in a world where complexity gets celebrity status?

Spending On Purpose is that approach.
It is a way to help you manage the risks inherent in spending
your income as you attempt to make your dreams come true.

The flip side of this, and the focus of the “purpose” part,
is controlling where you can, and stopping where you must,
spending habits and patterns that fail to make good.

Now, to be fair, you may have tried some budgeting.
Your experience may have been unsatisfactory. No big deal.
The method you used, not you personally, may be the problem.

Maybe it’s time to change the method. The old one is flawed.
Give up on the traditional budget format. You know the one.
You divide up all your expenses under Shelter and Utilities,
Food, Transportation, Insurance and Savings, Personal and Health Care,
and then throw all the rest into Other/Discretionary.

Unfortunately, this doesn’t seem to work for 50% of the population.
It doesn’t work because there is no immediate link to your motivations…
no driving force that has a powerful emotional stimulus.
And you need one to change behavior.

So get started examining what you value most, what you get for your spending,
And how that measures up to your expectations for the lifestyle you really want.

The steps to change start at the motivational level.
Create some new budget categories that reflect how you feel and think.
And then scrap all the ones that are rational…
and join the rest of us who spend from the heart not the head.

But that’s no excuse for not examining what you get for what you spend.

Copyright 2010 William M. MacKay
]]> http://www.billmackay.net/blog/index.php?entry=entry100627-192356 So guess what?
Here comes another government agency to help.

You are so easily tricked and trapped by the fine print,
a credit card agreement, a mortgage loan application
that a Consumer Financial Protection Agency is needed.

It will “give families a chance to take control over their money,
but families will have to be smart” states Elizabeth Warren.
Warren is Chair, Congressional Oversight Committee
and a strong advocate of the agency under consideration.

TIME OUT!
Will someone please show me how any agency or anyone can help you
take control over your money unless you are a ward of the state?

In the same breath, Warren echoes my point…namely that
“PERSONAL RESPONSIBILITY MATTERS.”

I’m for a major rewrite of all manner of financial contracts.
They need to be understandable at the grade eight level where,
regrettably, far too many consumers are conversant.

This still changes nothing when you are faced with a purchase decision.
To spend, save or finance remains the question.
Immediate pleasure or deferred gratification an agency does not rule.

Consumers are no more or less rational than they were in 2008 or 1898.
Having less money, no job and the fear those elicit have worked miracles.
You could be spending less or saving more, depending on how you see it.

No government agency facilitated that change. You did it all by yourself.
But are you inherently different? Has your deeper motivation changed?

I suggest that you are the victim of three hidden motivators.

The first is “Forced Choice”, a hidden motivator where regulation
compels that you spend on fees and services to get the benefits
only conferred by others, like your water, telephone, cable, taxes, etc.

You’re spending is also driven by what nature requires you have.
These are the realities of the human condition…food, shelter, and other basics.

If you have cut back and got frugal it’s most likely around two other motivators.
These I define as Social Choices and Free Choices.

Many of these, too are hidden motivators of your spending because
you are not aware of how they rule the choices you make.

Social choices are driven by convention, informal habits such as
a sense of duty (donating to the poor), fashion ( the latest outfit/style),
and custom (new car every three years).
Many are things you think you ought to do and have.
A dream to fulfill. A passion to satisfy. These are powerful motivators.

Free Choice is another hidden motivator at work on your income.
Your character inspires many of the things you purchase.
This is where impulses are unchained…your creativity explodes.
Putting a lid on these expenditures is tough indeed.

No democratically elected government agency will change any of these.

You are still in control but only just barely (as in rational choice)
until you get these three hidden motivators under your power.

GET THIS RIGHT

Awareness and understanding of “why your money disappears”
is far more helpful than endless navel gazing at where it goes.
You must get this right first. Then control is all yours.


Copyright 2010 William M. MacKay

]]> http://www.billmackay.net/blog/index.php?entry=entry100613-071509 While men and women seem to do it –shopping--differently
you still have to get it right to both feel good and meet your goals.

These are different in so many respects.

Feeling good is instant; satisfaction in the moment.
A welcome rush of dopamine as you salivate over
all the great stuff you could choose and finally purchase.

Isn’t it wonderful! Spending has its rewards
that have nothing to do with the object purchased.
But that often is the problem. Think QVC, the shopping channel.

Goal achieving is another matter.
The journey may be long, difficult, and frustrating at times.
At others, it provides a gratification that comes from
the recognition that you are making progress
towards something you have identified and thought about
as a way to make you really happy, provide security,
give you the status you crave, the lifestyle you want.

Gender differences are important to consider here.
Evolutionary psychologists are exploring how shopping
trigger some of your basic instincts which program you
to respond in certain ways unique to your gender.

Foraging and gathering for women with their sensibility
toward color, texture, and shape lend themselves to trips to the mall
and the social and companionable aspects of shopping with a friend.
Not everything is ever right (ripe) so repeated trips are essential.

Men are programmed to be more solitary in their hunt for prey
bringing home anything that met the immediate need.
Once captured, it was over and done with. Let’s eat.

Shifting the purpose of the gathering and hunting
toward longer term goals helps both genders focus differently.

Spending is no less gratifying when it supports a purpose
where the time horizon is longer and the fruits of the harvest
are evolutionary, building for the future as you age
and are challenged to survive in a different world.

Think about it the next time you go hunting or gathering.

Copyright 2010 William M. MacKay




]]> http://www.billmackay.net/blog/index.php?entry=entry100530-083011 By poverty I mean your self-image of being poor.
Or having less than you want and less than others have.

If you don’t think you feel poor, look at your actions.
It is your deeds and behavior that are the best indicators
of what you really feel and believe about yourself.

Your values, beliefs, and attitude represent that view.
Understanding these is one way of managing your spending
because spending is a primary tool to create and validate
your self-image.

No one can do this for you although it would be helpful.
You probably don’t want to do it for yourself either.
But you should. And your partner could help and vice versa.
This allows an equal exchange that may best serve the relationship.

Now there could be some troubling realizations from this, too.
You may recognize that you are responding mindlessly
to many purchase choices as you seek to raise your standing
in your own eyes. This becomes a habitual pattern.

This fixed-action spending is often automatic.
It doesn’t move you in the direction of your more
consciously considered longer term goals and dreams.

When you refocus your attitude toward what you have
rather than what you don’t have, miracles can happen.

They may not be of biblical proportions immediately.
But over time the cumulative changes that come from
a greater sense of awareness and gratitude for what
you do have will guide your spending to more positive ways
that validate the new self-image you have created.

The gap will close quickly between what you have
and what you want.

You will feel richer with no more than you had before.
Now that’s a miracle to celebrate.

Copyright 2010 William M. MacKay
]]> http://www.billmackay.net/blog/index.php?entry=entry100524-063934 There is little or no conflict about what to buy.
No laborious, gut-wrenching decision paralysis.

Rational choice strategy hardly matters at all
when you see something you want. Just get it!
Evaluation is easy; justification easier.

It’s amazing how decisive you are in the face of
inadequate information, time pressure, ill-defined goals.

Need I add – shortage of money.

But when goals are unclear the trouble starts.
Unless you know what you want to accomplish
no mount of stuff will get you there.

And with any ill-defined goal, how do you know
if your decision was right or wrong? Of course, you don’t.

Factor in all the financial choices you make every year and
there is room for ambiguity, waste, and large amounts of folly.

I’d like to think that buying a house and a car remain
the exceptions in this non-comparative process of decision making.
Here, if anywhere, is when you must actually weigh the evaluation
of options for their superior merit prior to purchase.

Most people get it that these should not be impulsive.
The challenge is to move more of your other spending
toward the satisfaction of longer term goals.

There is no reason to believe this makes for less fun.

Copyright 2010 William M. MacKay

]]> http://www.billmackay.net/blog/index.php?entry=entry100516-091846 And how does that feeling of well-being compare with today?
In spite of the Great Recession, you might have had a lot less then.

If you are old enough to remember houses were smaller 35 years ago
As much as fifty per cent smaller when you count square footage.
There was enough room, too on the highway to actually get somewhere.
And the space on your hard drive was less than a turbo stick.

What space you are in today is more about emotional space
than what you can buy with your income, dividends, and coupons.
And you have, on average, much more of those than before.
Yet, very little has changed, the experts tell us, about our happiness.

What happens is that you quickly adapt to improved situations
and peaks of satisfaction and pleasure that arise with something new.

Even bigger incomes and lottery winnings can’t maintain the emotional
high that comes with them and you are soon no happier than before.

This affect is more than a passing curiosity.

If getting more of whatever you use to keep score and feel good
is no longer able to raise your level of gratification and happiness
then why keep doing what you have always done?
The point of working longer and harder is now suspect.
Better to stop doing that and try something else.

If you don’t you might suddenly find yourself old and grey.
Perhaps too tired to keep on trucking until everything is just right.

Accept that there is no perfect moment
to get on with doing what you want.
And it’s okay to settle for ‘optimum’ conditions.
But identify these you must to move on wisely.

Wanting it all in maximum proportions
May never be enough to make you happy.

Copyright 2010 William M. MacKay
]]> http://www.billmackay.net/blog/index.php?entry=entry100509-104235 Male or female, young or old, white or black, rich or poor.
The incentive to act is identical…TO GET WHAT YOU WANT.

This is good, part of your original equipment.
Only when what you want is in conflict with other elements
do the challenges arise and present a critical test.

How do you get what you want when the means to the end is blocked?
Your means may be illegal, immoral, unethical, or an attack on what others want.

But most likely it is all about you and your expectations.

What you are pursuing may simply be unrealistic and at odds with your abilities,
education, or income in the context of today’s economy, culture, and traditions.

So here’s the test.
What do you really want?

Dive deep on this one because it may not be what you are getting today.
And there is lots of help out there to engage you in this exercise.

If there is an abundance of anything it is ideas, and many are free.
They offer you a great chance to live a little better day by day.

In time, with only modest changes to your attitude and desires,
what you want will be moving closer to what you have
and, more important, what you want to be and feel.

Changing your behavior is what’s required.
You can’t pursue what everyone else is doing.
It’s not to your benefit because their imagined goals
are no better than you’re imagined goals.

To make matters more challenging the system is also flawed.
Pick any area of life and tell me if corruption is not at play
in some arbitrary form that impacts equality, justice and fairness.

On your side, nonetheless, is a history of hope for a better life.
This is a truth we can count on.

But you have to help yourself and be responsible for what you get.
It is so much more fun when it’s what you really want.

Copyright 2010 William M. MacKay
]]> http://www.billmackay.net/blog/index.php?entry=entry100502-085715 At first glance that seems ridiculous.

Economic growth and a rising standard of living
have taken on biblical proportions as the righteous path
to a better, more fulfilling, and meaningful life.
As the tide rises we will all be better off, right?

The partner of economic growth and good times
is the aspiration to get rich, to have more, be more.
This is a critical element of the package.

But consider this.
For every force there is an equal and opposing one.
That’s the law of physics. No argument there.

Spending is that other opposing force.
It gets you moving along the path to acquire the good times
because you believe, in part, that your life is wanting, lacking.

You get that from the cultural, material and media messages
that create a self-dissatisfaction, a sense that you are
below standard, an imperfection that needs fixing.

There is an urgency to get it right when your value
is conferred by stuff and others who create a standard
of longing which is near impossible to achieve.
For good measure the bar is raised every now and again.

Each time that happens you review your standing, your progress.
What you “check out” in this exercise is much more than an inventory
and evaluation of where you are, what you have, and how you look.

It becomes an exercise in acquiring more stuff, more fixes
for what is lacking and needed for recognition, satisfaction.

That this spending has become an opposing force
far greater and more powerful than the original driving force
that started it all is evidenced by the fact that your debt
to disposable income ratio is so unbalanced in favor of debt.

The laws of physics shall prevail, however.
Equilibrium will be restored. Prepare for it.

Copyright 2010 William M. MacKay
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