Once we finally create our personal Debt-Free Spending Plan, and once we’re really living with it day by day, there are still little land mines that can blow our best-laid plans to bits. Usually the things that throw us are “unexpected” expenses—things like a birthday, a dinner for a co-worker, a lunch out for somebody’s retirement, or our child’s birthday party circuit. These are spending items that seem like they materialize just to annoy us, just to knock us off of our best efforts to live within our means.
Most of us have an inflated idea of what we can spend on gifts for other people. We might add $50 or $100 a month for gifts into our first-pass Spending Plan, expenses for family and co-worker-type events while not allowing ourselves even $20 of fun money. We’re tied up in obligations of gift cards, presents, dinners, lunches, and group events that end up costing double what we imagine. How do we put a stop to all of that mindless spending? When our money is close to the bone—meaning there’s not a lot of extra cash floating around in our Plan—how do we field these unexpected (and sometimes unwanted) “obligations” in our money world?
Here’s how: we address the “unexpected” by—you guessed it—creating a plan for the unexpected. Our objective in creating a Spending Plan in the first place is to stop mindless spending. In other words, we plan for every possible thing we might need in a rich and fulfilling life—and gifts are part of that life. That said, we’re debtors. Meaning, we have mental spending categories in which we go blank. We know food is a necessity, but we buy mindlessly as if there’s no limit on what we can spend. We think gifts are somehow “outside” the normal range of daily needs, so we get hazy and vague on how much we’re spending, as if it doesn’t count.
First things first. If we can afford $50 or $100 a month for gifts (meaning we’re funding all of our own needs, including fun money, vacation money, and savings accounts for things that are meaningful to us), then by all means, we can add a significant amount to our Plans for gifts. But most of us, when we’re starting on our Debt-Free path, cannot spend that kind of money on gifts. We need it for ourselves. We’ve been debting to fund our own needs, and we’ve got to stop that because the stress from debt is killing us.
So here’s what we do. First, we let everyone in our immediate circle know that we’re living debt-free so presents are going to be small and personal for a while. We shop discount stores. We take advantage of book store sales—using cash, mind you—and buy $3 books for our family and friends. We simplify. We give $10 gift cards instead of $50 gift cards.
Second, we plan for events. If we have a friend’s retirement party coming up, we put that in our Spending Plan for the upcoming month. If we have an average of 12 children’s birthday parties per year, we set aside something reasonable—like $10 a party—and shop accordingly. We set aside money in an account for Christmas and Hannukah and we downsize every gift and expense so we live within our Holiday Spending Plan. Most of the time we really do know that events are upcoming; we just pretend to be surprised because we haven’t put the expense into our thought process (or our Plan) for the month.
Third, we always keep a small Short-Term Savings Account for the unexpected. We use this account instead of our credit cards, and we fund it every month, no matter how small the amount. This account is for unexpected expenses like an overage on car repairs, an overage on a dental crown, etc. But it can also be used for an extra expense that we really didn’t see coming during the month. We can’t use our Short-Term Savings as a slush fund—there’s usually not enough in it at first to do that anyway. But it’s there for us if we need it.
The object of all this is simple: plan for everything. Plan for gifts—and be realistic. Plan for holidays. Plan for events. Don’t just spend mindlessly—that’s how we got into debt in the first place. And if we really, truly can’t afford that retirement dinner or co-worker’s lunch out—if our money is so close to the bone in our new debt-free life that we need some time to recover—then we say so. We opt out of things we can’t afford, and we tell the truth about it. “I’m a little financially challenged right now, and I’m living completely debt-free, so I can’t make it this time.” Tell the truth and people will not only hear us, they will support us.
Our goal is to always, always plan for what we need, so that our cash after expenses always belongs to us. Honest to God, if we plan for everything we need—including gifts and events—we will get to keep our extra cash and use it for something we really, truly want and love. That’s the whole idea behind the Debt-Free Spending Plan.