Budgets vs. Spending Plans

Lately I’ve noticed a ton of references to spending plans as opposed to budgets to keep track of where money goes. Since the word “budget” apparently has negative connotations, thinking of it as a “spending plan” is supposed to make us feel better about the fact that we’re paying attention to our finances.

I won’t knock people who benefit from calling them spending plans, but for me personally, it just seems silly. I tried to picture myself sitting down and saying, “Okay, time to work on my spending plan for January!” Well, okay then. It’s not really any different in my brain. Either way, I’m looking at my income and expenses and figuring out how to make the best use of my money.

Because my income situation is a complete question mark for January (and all of 2012 at the moment), I’ll be reverting back to the Single Mom Budget - I’ll buy the food items we need, pay our bills, and then deal with what’s left. Since I’ve conquered many* of my spending demons already, I’m not worried about cutting back right now; I really just want to break even for the month without dipping into savings. (*As many of you know, I’m still smoking. Which is disgusting and expensive and I need to quit. But I haven’t gotten there yet.)

My Budget

I have a pretty easy January budget. I need $650 to cover fixed expenses like utilities. $75 for gas. Around $300 for groceries. $110 for cigarettes (because I’m being realistic here). Overall, I need around $1135 in income to make it through the month without using any of my emergency savings. Luckily my bank stores and categorizes this information for me automatically, so I just look at my online banking to know where I stand.

This is a completely backward way of thinking compared to my previous budgets. Before, I knew exactly what my income would be and had to figure out how to disburse it. (This budgeting planner at Debt Advisory Centre gives you an idea of what I mean.) Now I only know what my expenses are and have to figure out how to earn the income to meet them. Interesting how it seems different but really isn’t. I’m still making the effort to figure out what I need to pay and in what order.

What if it was a Spending Plan?

Okay, let’s imagine that I’m calling it a spending plan. What would I do differently? Well, I’m pretty sure I would still have to know my expenses for the month - who I owe, what I owe, and when the payments are due. I would also have to figure out how to make the money to cover my expenses.

The only difference? I guess a spending plan is supposed to make me feel all empowered about the month of January, like Hooray! I made a plan and now I know what to do! But that’s the exact feeling I have when I budget. I’m taking control instead of just blindly spending money, and I get to sleep at night knowing I’m not going to pay any late fees or overdraft charges.

So What Do YOU Call It?

I know where people are coming from when they say they detest the word “budget.” If you watch old school TV shows, the families are all, “We can’t [insert really awesome activity, vacation, or purchase] this year. We’re on a budget.” And you get that vibe that they have done some REALLY BAD THINGS and now they’re paying for their sinful, overspending ways.

But really, I think that’s the mindset that gets so many people in trouble in the first place. Thinking that budgets are something you do after you’ve screwed up is the wrong way to make progress. Now, if you’ve already screwed up, it’s not a bad place to start. But if you’re sitting around going, “Meh, I’ll just spend money however I want. Then when I’m freaking out, I’ll make a budget to punish myself,” you’re doing it wrong.

Basically, it doesn’t matter what you call it as long as you do it. Whether it’s a budget, a spending plan, or an episode of Survivor: Dollar Edition, most people need a way to keep up with money. (Sidebar: How awesome would it be to withdraw your entire paycheck from the bank in $1 bills, give them names and personalities, and see who gets “voted off” to pay the electric bill and which dollar bill is left standing at the end of the month? Obviously I have no life.)

I want to know - how do you keep track of your money each month? What do you call it and why? And if you’re reading this site and STILL haven’t started dealing with your money, why not?


Budgets vs. Spending Plans41 Comments

  1. Hey if you start playing Survivor, Dollar Edition-I'm in.  We will have no life together! But other than that, I call my budgets "budgets".  But I also don't try to give it a negative vibe-I love my budgets! (And yes, I have plural budgets…it is kind of sad.

  2. Lol. A spending plan - interesting. This might be a more fitting name for a budget if one never sticks to their budget. I think of mine as a budget - it's something that I have to (or just should) stick to. A spending plan sounds more like a suggestion to me, haha.

  3. I use Quicken to download transactions every day this way if something is off I know right away (if a check was supposed to be 500 but cleared as 5000…charges to my CC I didn't make, etc.) Then I compare the balance - outstanding payments + credits with my excel spreadsheet to make sure we are all in balance. It may sound dumb or redundate to have a 2 point system but I like it and It has saved me a few times.

  4. I like using the name "spending plan" mostly when I'm talking to other people or clients. I agree with you, that it's more about the mindset and attitude than actual names. But for some reason people hate when I tell them "I'm putting you on a budget". They feel like they're being punished, and a spending plan creates a sense of spending in a smart way. I mean you're going to spend money anyway, whether it's on bills or coffee. 

    As long as my finances are in order, I could call it anything really. A budget, a spending plan or Survivor: dollar edition (lol) all have the same goal, to manage money properly and be in control of your finances.

  5. I work with individuals and families whose income is at or below 125% of poverty. Some of my clients feel that budgeting their money is punishment, so I use "spending plan" or "money management" to help lessen the negative connotation. Whether in a group setting or with one-on-one counseling, we talk about the importance of telling their money where to go at the beginning of the month so they aren't wondering where it went at the end.

  6. I call it a Budget - that's what my excel file is named too.  I'm old school, I guess :-)   And no matter what I call it, it's still not enough money - haha!

  7. Call it anything you want!  I control my spending by constantly reviewing my expenses.  It provides me periodic (monthly or more often) opportunities to reduce my expenses.

    • I think that's the most important thing - just keeping track and knowing where your money needs to go. A few years ago, I had no idea how much money was needed to pay all of my bills in a month. I just kind of flew by the seat of my pants. Now I can tell you exactly how much I need, as well as how much I should have left at any given point in the month. It's made a huge difference in my spending.

  8. I don't keep any track but what I am trying to do lately is to ask myself every time I pull out my wallet if this purchase is really, really necessary. So far it is helping… We will see. :-)

    • I do the same thing! I also have a rule that I have to wait 30 days before making any purchase over $100 (other than necessities like groceries or car repairs). That has helped me a lot - now I don't even have to force myself to wait because I'm so used to it.

  9. I call it 'budgetting' - to reflect the fact that our lives are dynamic and so our budgetting should be as well. I have a budgetting tool that I designed for myself. It has entris for the income (different kinds), different types of spending (fixed (mortgage, water rates etc. generally thing that can't be negotiated), flexible (insurance of different kind that can be negotiated) and changing (food, drink, memberships etc.). Works for us - and one can make choices and take decisions using it. I also have an 'I am so worth it' allowance - this is for fun and the finer things in life; about 8% of monthly income and has to be used every month.

    • I love the idea that your allowance has to be used every month! Back when my ex-husband and I gave ourselves an allowance, I was always trying to hoard mine in case "something" happened. I don't know if I was preparing for disaster or what. But I was reluctant to use the money because I was so worried when I had a limited amount. If my income ever gets leveled out, I totally plan to implement an allowance that must be used.

  10. I'm on board with budget too. Can't quite grasp the difference between the two. Is a budget more of a set of parameters and limits you must meet and a spending plan just a guide that you can shift around without feeling that you've failed if you go over? I don't know. Po-ta-y-to, po-tah-to.

    • My budget is pretty fluid; I know where my money needs to go, but I also keep it loose enough to change if my needs change. I'm not disciplined enough to have separate savings accounts for car maintenance and all that stuff; I just keep a miscellaneous category that can be used for the inevitable unexpected expenses. 

      Really, I don't even know that what I do counts as a budget, now that I'm thinking about it. I don't necessarily try to reduce my spending, because I've got that down to a science for the most part. I just use it to remind myself where the money goes. Otherwise I might look at my available bank balance and think I can use the money for junk.

  11. I track budget - how much I can spend in various categories but also cash flow. It doesn't do me any good if I come in on budget for December, but don't have any money left for the January bills that are due before my first January paycheck. I cash flow out the regular bills and paychecks two months in advance to make sure I never get close to being overdrawn.

    • That's a good point - my budgets are always rolling as well, because I had to look at what was due between paydays instead of what's due in X month. I never understood why people got excited about 3-check months because I still had bills to pay before I got paid again; I didn't really have "free" money.

  12. I love how you put your personality into your writing.  Makes reading it a lot of fun. :) You are correct that many people associate the word budget as being something negative.  I actually think of budget and define it as a necessary tool to accomplish your goals… for me, it's my roadmap to get where I want to go. :)

  13. I call it a budget, and I don't feel anything negative about it…I feel empowered and organized. Good luck as your transition, and let us know how it goes! And no judgment, but I hope you can stop smoking soon! 2012 goal???

    • I keep thinking I want to make it a goal, but I also know I have to truly want to quit before it will happen. A former colleague of mine does hypnotherapy, but it didn't work for me because for some reason I still cling to cigarettes as a coping skill. He told me to come back when I WANT to quit, not just when I feel like I should. Ugh, of all the habits I could've picked up!

  14. I'm old school - we have a family budget. I've used spending plan, but it kind of loses out the income portion of the budget. I'm a big believer of do what works for your family's finances. If creating a budget keeps you on target, then for it, but if having spending plan is more motivating, use it. 

    • I'm totally with you. I think calling it a spending plan seems silly, but that's just me. I know many people who are able to use something as simple as a different term to change the way they think about money.

  15.  As you may know I call it a spending plan.  The reason is the negative vibe the word "budget" gives me.  I've adopted the word spending plan because it gives me a sense of control unlike the word budget.  Ultimately it comes down to execution.  A large part of finances is behavioral rather than numbers on a paper and if you have to change the word budget to get you to execute, do it.  It's a small thing in a long line of things to get your to reach your desired goal.  Some people call credit cards the devil, but technical they are not they simply are a tool obtain items.  Those same people may cut up their cards, freeze their card, dip it in peanut butter to curve their habit.  Those techniques all help one execute.  It's not different. 

    Another example will be the techniques you will ultimately use to curve your smoking habit.  You may try the patch, gum, 1 cigarette a day, lollipops, that fake cigarette and so on and so forth.  You will do what you have to do to ultimately stop smoking.

    Moral of the story,  think of it as a brain trick to get an desired result. 

    • I agree with you; if the word "budget" makes you cringe and prevents you from taking action, by all means, call it something else! I'd rather see people call it any number of things than fail to implement SOME kind of roadmap for their income and spending.

      I'm pretending not to see the part about quitting smoking because I'm not ready to commit just yet. :)

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  17. Ha, this is funny only because my hubby prefers the Spending Plan idea.  I agree it is the same but if it gets him to sit down and go over our "budget" then so be it.  He get frustrated at times because he works his but off and doesn't get to "spend" his money (our fault due to debt and having four kids) but it can be a bit draining on him.  So he prefers "spending money" on savings, the kids sports, groceries, etc.  All the while they are still "budgeted" items in m book :)  I don't really care what it is called as long as we know what we are spending our money on and why. 

  18. I'm with you, man, I'm on a budget not a spending plan.  I like the word budget, it makes me feel responsible and people know what it means when I say things like, "that's not in the budget."  But, I'm also not very cool, so that might have something to do with it.

  19. I call it a budget. Budget is for us normal people with normal income levels and expenses. A spending plan applies to our government and those ultra rich people who don't worry about how much money they have coming in, they just worry about how much they want to spend. Note, I used the word "want".

    I tried to do a spending plan once. I planned to do the following
    House payment   $2500
    House repairs        500
    Car Payments      1500
    Gas                       800 (it's 60 miles oneway @ 12mpg)
    Car Insurance         300 (2 kids less than 25 yrs of age)
    Groceries               700
    Water                      80
    Cable                     120
    Electricity               100
    Internet                    75
    Daily Cash needs      600
    Spending Plan Total $7275.00
     The "Spending Plan" didnt work for me. I set a new "budget" that month.

  20. I have to admit that I have never budgeted.  I have to agree with Suze Orman that it feels like a diet and I just know that it would eventually lead to me going 'off' my diet.  I just try to save a certain amount each month and I'm aware of my spending.  It's worked so far.  No credit card debt.  Our emergency fund is our insurance for anything that comes up and it keeps growing.

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