Wednesday, October 14, 2009

Budgets: A tale of two garages

Of course budgets can be very useful, it’s just that when created they usually require a great deal of self discipline. The simple fact that you need a budget to get out of financial trouble is exhibit number one that self-discipline was probably absent in the first place. Pinning your financial dreams on the assumption that you’re going to be “good” next month generally leads to devastatingly poor results. Your personal finances are too important to risk with little more than hope and optimism.

Just incase you think that the previously absent self discipline will save you from financial flagrancy tomorrow, take this brief exercise:

Question: How much self-discipline do you have today?
Answer: Exactly the same amount as you’ll have tomorrow.

In his book “How to live within your means and still finance your dreams”, Robert Ortalda suggests that to understand the discipline required to maintain a budget; “you have to think about garages”. He says, and I agree, there are generally two types of people when it comes to garages. There are those that have clean and tidy garages, and those that have messy ones.

The clean ones are maintained by an exclusive group of garage zealots. They have peg-boards on the walls with pictures of the tools and things that should be hanging there. You never get to see the picture of the thing because the thing that should be hanging there always is. Jam jars are screwed into lids that are nailed to shelves. These contain every sort of nut, screw, nail, grommet and widget any self-respecting handy-person could ever need. Everything has a place and everything is in its place. And may whatever god you believe in help you if you move anything or don’t put something back.

The other type of garage is always full of mess. Things go in there and then they don’t come out again. The car has trouble fitting in. It’s full of dust and empty paint tins. The people who have these kinds of garages have a mantra they keep chanting over and over again “One day I’m gunna clean out the garage”.

Finally that day eventually does arrive and after several mini-skips, the garage is beautifully clean. It’s so good its just missing the peg-board with the pictures. But after a while is gets messier and messier and finally it’s back to the way it was. Then the mantra begins again “one day I’m gunna clean the garage”

The people who own the first type of garage demonstrate a tremendous amount of self-discipline. They have to. It takes a lot of thought and a lot of work to keep a garage that clean. Daily maintenance – sweeping, tidying, putting things back on the pegboard after you finish with it – not leaving it where you were working.

For a budget to work, it’s got to be designed with the second type of person in mind. Those who sporadically like to clean out the mess.

If you think it’s easier to tweak the little expenses and do it week after week to save twenty or thirty dollars, then go ahead and knock yourself out. I reckon it’s a lot easier to just to do one or two biggies and enjoy the savings over and over without the effort. Why scrimp on essentials that call out to you every time you shop when you can just scrap the cable TV and save heaps. These are ‘structural’ changes to the way you previously spent your money. Doing things this way makes daily self-discipline significantly less important. Kind of like ripping off a band-aid – do it fast and do it once. Or if you’re into it, you can go the other way and slowly take it off over and over again, day after day of band-aid ripping.

Sure the once off clean-out can cause pain. I know you can’t watch re-runs of Seinfeld and keep up with the latest on Fashion TV when you dump cable but when you get your financial house in order you can always put it back on. When you do you might find that Jerry has come out of retirement and you can watch new episodes – oh but wait, you’ve already seen those on free to air!

1 comment:

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