How is Spending on Purpose different from a regular budget? 

Unlike the thrust of a ‘dollar defined’ budget, Spending On Purpose is about the lifestyle you want (the future), not the money you spent (the past). This means that it’s not focused on being over or under your budget (dollars). It’s a lifestyle planning strategy for effectively allocating your income among motivationally driven ‘spending categories’. These new expense categories are selected and evaluated for their optimal contribution to your immediate pleasure, lasting happiness, and your dreams. This makes them very different from the typical budget categories (food, transportation, health care, etc.) which are used primarily to control household expenses. Finally, there are no arbitrary benchmarks for how much you spend on specific things… no fixed percentages for saving or food or anything. What you spend is guided by other more relevant factors.

How do the Lifestyle Ability Factors help me achieve my ideal lifestyle? 

The Lifestyle Ability Factors – Value, Affordability, and Sustainability – will guide you surely and quickly in identifying, evaluating, and allocating how you spend your money in pursuit of your way of life and aspirations. They ensure that your income is used more effectively to get what you really value most.

Does ‘The Value Factor’ imply a cheapskate approach, always buying deals/discounts to save money?
 
Not at all but being thrifty is good practice. What The Value Factor embodies are the quality of life elements of your experience that contribute something meaningful and lift your spirits. It is a measurable indicator (via the Spending Categories) of the satisfaction and delight you get for the money or time you spend and how they fit with your values. Of course, a great deal, when it’s something I need, always makes me happy. I expect that works for you, too.

What’s so different about your ‘spending categories’ versus the ones in a traditional budget? 

Three very important differences. Both affect how much you will spend. Let me apologize in advance for what I know will be a long answer because it is a great question. I believe there are 3 key points to this.

1. My spending categories reflect your motivation behind what you buy - not their domestic function - which is what you find in a typical budget…i.e. housing, transportation, food, etc. There is a huge difference in how this affects your spending because it changes the lens through which you see your lifestyle.

2. When viewed in combination, these new categories also organize your spending to showcase what you value most. Their visibility, their in-your-face reality,motivates a reallocation of your income to get more for less in the pursuit of your dreams and personal aspirations. Let me explain that further. More, in this case, is the long term gratification from a ‘vital few’ expenses that really give you lasting happiness, not the ‘trivial many’ that consume your income without much lasting positive effect. You can’t ‘experience’ your progress toward the goals that really excite you in a traditional budget. It’s not possible. A target you can’t see, you can’t hit!

3. It offers a new way (via the Spending Categories) for realizing your lifestyle dreams in a world where the cost of everything keeps going up. Need I remind you that the cost of  what your household eats and uses (eg. bread, chicken, gas) are not what the government reflects in their inflation numbers. (What planet are they on?) So how do you get ahead of the game or just stay even when everything costs more? The answer: More of what you are earning from your work must be allocated to those things that are vital to your satisfaction and happiness. If you’re retired on a fixed income, your spending must be directed with the precision of a surgeon’s knife if your pleasures and leisure pursuits are to be sustained. It is a very easy to identify what those things are by the Spending Categories.

What are the Spending Categories in your Lifestyle Planning approach that I would use to track my budget expenses? 

• Audited Access: an expense required to get some other service or product benefit
• Body Basics: what you need for food, shelter, health care … the survival stuff
• Class Comforts: upscale Body Basics and quality of life products and services
• Dreams’ Delights: what gives your life its defining pleasures and meaning
– Passion Absolutes: a Dreams’ Delight upon which your happiness is founded
• Quality Quirks: ‘character-driven’ expenses above what’s needed to reach your dreams
• Regrettable Risks:  expenses that fail to enhance your lifestyle and may damage it

 Does your approach force me to give up using credit and debt?  

 No but there are two qualifiers. Basically, they are your income and your dreams. The Affordability Factor establishes how much is prudent to spend given your income and your lifestyle dreams by considering the merits of deficit spending (going into debt) when alternatives, projected income, and opportunities warrant it. For example, a new higher paying job (perhaps with a longer commute to work) allows you to purchase a better, more reliable auto on a financing plan.

Given today’s financial uncertainty how do I protect what I have and still enjoy the freedom to spend on fun and entertainment? 

As 2008 unfolds we cannot escape the credit and mortgage problems and the economic fallout of a declining economy. So…fun is important especially in tough times. I strongly support your ‘enjoyment today’ approach and would extend that to your potential for enjoyment in the future. That’s also what you must protect. You cannot allow yourself to get caught in the downdraft of events you cannot control. The Sustainability Factor provides clarity of purpose to your spending that you will still be able to afford the lifestyle you want by examining the scale or proportion of what you want in relation to your ability to pay for it, in good times and bad. You must, however, consider the source of the money you spend. Borrowed money makes your lifestyle very vulnerable. The Affordability Factor helps you protect what you have today by cautioning your use of credit and debt, if that’s the source of your extra pleasure.

Explain what goes into the Audited Access category.

Audited Access identifies the mandatory and voluntary expenses that you incur because they are a support function (e.g. internet fee) or prerequisite for some other product, service, or benefit (e.g. a driver’s license) that enhances your lifestyle.

How do I convince my partner that beer is not a Body Basic?

Carefully! Start with the definition. Body Basics are routine expenses that nature requires you to make for your survival since they are associated with your safety, security, nourishment, shelter, and health care. But here is the challenge created by years of habit oriented spending and conditioning. What we regard today as needs has grown parallel to the rise in our sense of entitlement. Now, all our wants are starting to feel like needs. Be clear that you are not asking him to give up his beer … only to agree to put the expense in a spending category that better reflects its contribution to his lifestyle enjoyment. I would suggest that Class Comforts seem like the more appropriate category.

What do you mean by the word ‘class’ in the Class Comforts spending category?

Class Comforts are the upscale, if not luxury, expenses of the Body Basics plus quality-of-life pleasures and pursuits compatible with your upbringing and income level. Some of these attitudes and beliefs come from your ‘social’ or class distinction but most come from your parents. Your expenses here reflect all this stuff motivated by “what convention impels us to do” – those things you almost feel you are ‘forced’ to buy that relate to an enhancement of your personal image, your status, and power. They may also be driven by the convenience these purchases appear to offer in our time-starved culture.

Are Dreams’ Delights the top rung of my lifestyle budget plan?

Yes. The Dreams’ Delights spending category captures the expenses of your passions and aspirations that give your life its defining character and meaning, a combination of emotional and financial measures that make the optimum value-added contribution toward the achievement of what really matters most. Of course, what matters most to you may not be someone else’s Dreams’ Delight or even your partner’s.

How do I identify a Passion Absolute among my Dreams’ Delight?

A good indicator of the difference is the intensity of your feelings when asked to give them up or cut back spending on them. In practice, Passion Absolutes are those ‘must have’ Dreams’ Delights expressed by material goods, personal activities, and relationships upon which your happiness is founded; if these are unavailable or eliminated, all other aspects of your lifestyle are diminished regardless of all you have acquired or achieved.

Are you saying my budget should eliminate all spending on the things that make me unique, what you define as Quality Quirks?

No but there are limits. Quality Quirks are expenses that are inspired and spontaneous expressions of your character that do indeed make you unique and interesting to others but they arebeyond what it takes to realize your wildest dreams. Life is about choice. If you are not spending enough on your dreams then choose to give up some spending on your quirks to get more satisfaction and happiness from something else with a proven higher value.

If Regrettable Risk expenses are prohibited why bother making this a category?

Indeed, they are out-of-bounds expenses all of the time. But we are not rational all of the time. We make some (how about many!) emotionally-driven choices with our money that have negative consequences. And we get a lot of help from advertisers to spend our money on short-lived pleasures. Regrettable Risks are expenses that are often the result of impulsive and compulsive spending. In no time at all, they prove to be wasteful, failing to contribute what other categories do at similar cost and less risk. In fact, they threaten the lifestyle we have and want to sustain. The Regrettable Risks category is there to remind us of our folly and deal with it constructively after the event. They are inevitable because we are such remarkably emotional creatures! 

How does Spending On Purpose differ from the family budget I set up? 

This new lifestyle planning “budget” is the end result of a very proactive involvement with each of your expenses through a 3 step process of analysis, revaluation, and allocation. There is no ‘group think’ common to the traditional budget which often only assesses your total spending and how much it is over or under your budget. No. With this new approach, the decision to continue, stop or increase your spending on an expense is ‘item specific’ depending on your motivation and its value-added contribution to your lifestyle. What you value most cannot be at the expense of things that matter least. A typical family budget can easily fail this test.

Who determines the value-added contribution of each expense?

All your expenses allocated to each spending category are qualified by one of three levels of priority for their value-added contribution. You and/or your partner determine what that is. Then they are quantified by their cost as a percent of the total category expense. This step (1: Analysis) reveals your consumption habits and the effectiveness of your spending. You have to ask yourself. ”Is my income going towards what makes me happy and supports my dreams … or not?” The answer, your truth, should be cause for celebration but it is often a bitter pill. We waste a lot of money that could be doing more to build and sustain a better lifestyle.

How can I revalue what I have already spent my money on?

First, it’s never too late to appraise what you got for the money you spent because you don’t consciously repeat the same mistake if you can remember what it was. But with 50 to 100’s of transactions every month this is a challenge. So … to appraise your purchase (be it good or bad) and make it truly unforgettable Revaluation (Step 2: of Spending On Purpose) gets into its emotional and financial impact. This is the moment of truth when you ask yourself, “What is this item’s contribution to my satisfaction, to my preferred lifestyle relative to its cost and my expectations?” You then score its Pleasure Value and Future Value using the value scale provided.

How is planning next month’s lifestyle budget by your approach any different than what I do now with the traditional budget? 

The Spending Allocation Plan (Step 3) directs your spending toward greater satisfaction and your Dreams’ Delights by investing in an optimum mix of lifestyle contributors (which Step 1 & 2 carefully identified). The goal is to balance your income with your values and aspirations. The money you allocate is directed toward preferred categories and specific items within those categories that offer the greatest contribution to your dreams. Money spent on non-contributors is decreased or eliminated where it is appropriate to do so. This frees up cash for your Dreams’ Delights.

Is it essential to balance the budget every month in your approach?

No. Spending On Purpose allows for a deficit although the long term goal is a balanced budget or a surplus. But the real world is what it is... a lifestyle (for many of us) dependent on credit. To face this reality, I have created a Dynamically Balanced Budget process that allows for deficits within generous guidelines. To be practical and prudent, the final step of the Spending Allocation Plan ensures that what you want is what you can afford and sustain given your available income. [ Note: see principles discussed below]

What are the guiding principles behind your new budget organization? 

A great lifestyle demands that things that matter most should never be at the expense of things that matter least. In support of that position are the following principles;

• Spending expresses your values.
• Revaluing the past determines the future.
• Your spending – not your income – determines your lifestyle.
• Spending must not exceed projected income.
• Thrift is an attitude essential to a balanced budget.
• No spending should diminish your quality of life or jeopardize your future spending capacity.
• Future prospects determine your spending limits.
• The source of your spending impacts your ability to sustain your lifestyle.

 [A full explanation of the background to these key points can be found in Chapters 3 – 5 in my book, SAVING Is for Suckers.]