Updated on 10.10.11

Discretionary Spending and “Forgetfulness”

Trent Hamm

Sarah and I have a pretty solid arrangement with regards to discretionary spending that tends to work well for us. Simply put, we talk about our goals so often that we basically trust each other when it comes to discretionary spending. It works for us because we’re on the same page when it comes to spending money in that we’d rather both hit our long term goals than have some of the short term things that don’t mean as much.

That doesn’t mean that we don’t both spend money unnecessarily – we’re not hermits, after all. Sarah’s big weaknesses are books and “natural” goods. Mine are books and board games.

For me, at least, I will sometimes pick up a book that I’ve been wanting to read without really thinking about it. I also do a lot of book and game trading via the mail, so sometimes postage can add up.

A few months ago, I went on a big “trade by mail” tear and burnt through quite a bit of postage without thinking about it too much. At the end of the month, I took a look at our remaining money in our checking account and it was notably lower than I expected.

This wasn’t a real problem – after all, we’re talking about having maybe 5-10% less than expected, not anything approaching an overdraft. Still, it raised some alarm bells for me.

Little purchases happen all the time. Someone buys gum in the checkout aisle. Someone else buys a beer after work. Another person might pick up a few rented movies.

Little purchases can also add up. Spend $3 on average each day and forget about it and at the end of the month you find yourself with nearly $100 in shortfall.

How exactly can I handle “forgetfulness” in terms of discretionary spending?

I’ve put a system in place to help me control this type of financially flawed forgetfulness.

First, I simply take out a small amount of cash each month from my checking account. This is more than enough to cover the postage on the packages I mail out and cover a few small incidental purchases.

I essentially use that withdrawn money for all of my little purchases over the course of a month. If I mail a package that’s related to a hobby, I use that cash. If I buy a pack of gum at the store, I use that cash. If I pick up a book at a bookstore, I use that cash.

I don’t really worry about keeping track of it as long as I have some remaining cash in my wallet. I recognize that little things like this will happen and I’ve alloted some money for it.

If I find that my cash has run dry, then I start paying very careful attention to my discretionary spending. Often, I’ll just completely say “no” to any such small discretionary purchases. The exception to that is if I’ve pledged to trade something by mail, in which case I usually go ahead and mail it.

If I splurge beyond that “discretionary spending” amount in a given month, I withdraw less next month. This way, I don’t begin to establish a new standard for how much I can spend a month. If I’m suddenly allowing myself to spend $40 more a month without thinking about it, then I’m probably going to find ways to thoughtlessly spend that $40.

One key part of all of this is that I’m pretty happy with my level of discretionary money right now. It gives me the freedom to buy some little things, but it also safeguards me against interfering with the big things that I want. I don’t resent the amount because I know that I usually don’t need the things I’m buying with it, I have the freedom to use it however I’d like, and the rest of my money is going toward more important things.

It’s actually pretty liberating, in a way. I don’t have to micromanage purchases in the moment and I also can feel confident that the long term is taken care of, too. For me, it’s a win-win approach to the little purchases in life.

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  1. Other Jonathan says:

    I have a pretty good handle on my discretionary spending anyway, but one of the best ways I avoid making little 3-dollar “impulse” purchases is by not shopping. In a typical week, I may have one single instance where I’m in a retail store of some kind. Throughout the week I bring my lunch to work (so I don’t go out at lunch), I drive straight to and from work (I don’t stop anywhere on the way home), when I buy gas I pay with my card at the pump rather than go inside. It makes it a lot easier not to impulse shop.

  2. Steven says:

    My personal habits are along the lines of those of Other Jonathan. I don’t worry much about discretionary spending since those moments are really few and far between.

    What really tends to get me are the times when I splurge on gear for my hobbies (mostly rock climbing.) It’s pretty easy to drop $100, or more. Of course, this doesn’t happen regularly (every couple of months, or less) so in the scheme of things, I’d bet I spend less on occassional splurges for gear than many people do with their discretionary income.

  3. valleycat1 says:

    I use one CC for almost all my online shopping, and have set up an automated reminder in my online CC account when I hit the limit I’ve set for my monthly charges on it. It has been particularly useful now that I have an e-reader and am ordering books throughout the month, as it’s easy for me to get carried away.

  4. cc says:

    i have a sad workaround for this. i check my bank account weekly and have a pretty good idea of what’s in there at all times. unforch, if i want to buy a $15 apple pudding cake at the store, that’s like a weeks worth of provisions (and really, i’ve only got money for about 2-3 weeks of groceries right now).
    so really, i’m skimming the line so closely that i just plain old can’t afford it most of the time.

    i do have a separate account for my allowance, which is pitifully small (1% of my income, currently at $14.90), but i am FIERCE about that. yes i can spend $3 on a bauble, or i can continue saving and get something in the $20 range.

    i find it depressing that i’m using the same style of reward system as when i was a kid- especially since the amounts are basically the same.


  5. kristine says:

    cc- Every person in my family gets 20/wk discretionary spending. But that includes lunches. This makes all of us bring lunch from home- so we can spend that 20 on something else! I splurge 10/wk, on greasy movie popcorn and soda with a free Tuesday movie, and save up the other 10 for unexpected times out. So our allowance is similar! But…15/wk for food? That’s really tough. I feel for you. We average 100/wk for three, but that always includes canned food for a rainy day.

    I do the same as Jonathon and Steve- no stores. Al purchases are planned and budgeted in advance. Once I weaned off of stores, I found them less appealing.

  6. krantcents says:

    Forgetfulness can be cured with a journal. If you really need to remember all your purchases.

  7. mary m says:

    Valleycat that’s a really good method!

  8. cc says:

    kristine- that’s a great idea, i like mixing it in with take-out money.
    15/wk for food is in addition to my husband’s grocery shopping. he buys most of the food, the 15/wk is usually lunches and snacks for me (i work from home).
    also, those apple pudding cakes are just mad expensive.

  9. Emma says:

    to cc
    I can see a sense of humor in your post! Keep it up. Working from home might have some benefits- one doesn’t have to campare yourself with others all the time. Everybody gets influanced by the environment somehow.

  10. valleycat1 says:

    It occurs to me that this continuing struggle many adults have with keeping discretionary spending within one’s budget supports the idea of teaching your children to save a portion of their allowance, instead of the allowance being spent on whatever, whenever.

    Back in the day when my kids were small, I didn’t see the ultimate value in that, but now finally get that if you’re used to having free reign with the money you have coming in, it’s harder as a grownup not to just spend your entire paycheck & run up CCs to the limit. But if as a child you develop the better habit, it’s easier (&, I assume, more likely) to continue as an adult.

  11. Kate says:

    I think that many children who have grown up with supervision about how they spend money also go through a period where they rack up discretionary purchases. The huge difference is that it is always easier to go back to good habits than to completely form new habits.

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