One of the often overlooked values of budgeting is the Power found in planned purchasing. There are a few different ways you can look at this Power, and a myth I would like to debunk.

Planned purchasing will help you:

• make smarter buying decisions
• avoid impulse spending
• be rid of guilt when spending

Make smarter buying decisions
What my wife and I have noticed ever since we began actively (not intensively, we’re talking 2 hours per month) budgeting is that we make smarter buying decisions. We are more alert, attentive, creative, disciplined, hard-nosed, prone to negotiating, meaner, and leaner when it comes to giving anyone our hard-earned, hard-working money.

At the beginning of the month, when you sit down together, you simply decide what your dollars are going to do. Within those 15-30 minutes you will also began scheming and dreaming on how you will maximize your dollars work effort. You budgeted $300 for groceries? Well how the heck can we get every dollar of those three hundred to go the distance?

“Jesse, please don’t throw away the weekly ads. I need those so I can plan what we’re going to have for dinner,” my wife might say.

“Man, our electricity bill was pretty high last month. Let’s see if we can’t remember to turn off all the lights.”

“We need to drive to the airport twice this month, we have that wedding that’s two hours away, and Grandma wanted us to bring the baby for a visit. Gas is going to be out of this world! I can call my friend and see if we can’t carpool to offset some of the cost.”

“The baby needs some new shirts. Let’s keep your eyes peeled for any garage sale signs this weekend while we’re out.”

And so it goes. What might have happened? I throw away the ads. Julie ends up spending more than necessary. We don’t acknowledge the increase in electricity and simply chalk it up to a “woe is us” type of attitude. We get nailed in gas for the month and could have totally avoided it. We pay full price for shirts that will be useless in six months (or until another one comes along at least.)

When you plan your purchases you think, plan, strategize and maximize your dollar.

Avoid impulse spending
When a plan is in place you have a reason not to go off and blow some money on an emotional whim. If you have no plan, there is no reason. And when there is no reason, there is no motivation. Without motivation, there is no A C T I O N!

Let’s face it. We’ve all been there. We’re depressed, exuberant, lonely, excited, happy, sad - whatever - so we want to spend some money. Or maybe you’re out grocery shopping (with your list even) and you see some Ben & Jerry’s ice cream. It wasn’t part of the plan. It’s much easier (I’m not going to say it’s easy) to walk away. Not part of the plan man.

A plan is a roadmap to a goal. Your goal (perhaps New Year’s Resolution) may be to get out of debt, save for a downpayment (a big one) on a home, invest more for retirement, help your children with college, etc. It’s not nearly as important exactly what type of goal it is. It’s important that you have one. And to reach that goal, a plan is absolutely necessary.

Be rid of guilt when spending
Did you plan to buy a portable DVD player this month? Great! Do it! Rest assured that a planned purchase is usually a reasonable purchase because of the thought, time, effort, strategizing, etc. mentioned above. Please don’t feel bad if you’re spending planned money!

As a matter of fact, there’s nothing that feels quite as good as going out to eat to a really nice restaurant where you know going in that you can order pretty much whatever you want on the menu. Want to be daring and get a soda? Go for it ;) Want dessert? Maybe two? Sure. How about an appetizer? Of course.

Guys: while you were budgeting at the beginning of the month, did you not exert all negotiating skills in your power to make sure your wife was on board with the fact that you needed a new drill set?

Ladies: while you were budgeting at the beginning of the month, did you not exert all influence in your power to make sure your husband was on board with the fact that you needed a new outfit (shoes are part of the outfit)?

Then promise me that when you actually purchase these (or some other things w/o the stereotype) that you will not feel guilty doing so. The Power of planned purchasing is that you agreed with yourself, or agreed with your spouse if you’re married, on what you would be buying. The power of a zero-based budget is that you are faced with the fact that you have limited resources and cannot consider debt as a viable way of increasing your resources (it does just the opposite). With the zero-based budgeting principle firm in your minds, these fun purchases can be a part of your money life. They should be.

I’m spontaneous. Budgeting ruins that.
I’ll admit that as soon as you plan to puchase something, it no longer can fall under the term spontaneous. However - can’t you plan for spontaneity? I’m not saying you plan for every purchase, I’m saying that you plan for the fact that you aren’t going to plan for every purchase - that you will be spontaneous.

So just estimate it. When you’re budgeting at the beginning of the month, give yourself a bit of room in the “Miscellaneous” category or “Fun Money” category. Heck, make a “Spontaneous” category if you want. If you don’t have a lot of “room” in your budget, then you don’t have a lot of room for spontaneous purchases and will need to face that reality. If you have a bit more room, you can afford some spontaneous splurges.

The deal is this though. Planning your purchases at the beginning of the month makes your money work harder. You will see your money S T R E T C H to do what it needs to do. It’s almost magical. It’s powerful. It works.

Article reprinted with permission.
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Jesse Mecham developed the YNAB Personal Budget Template.  YNAB uses Four Simple Rules of Cash Flow Management. Following these straight-forward rules will get you on track step by step towards healthy, easy, intuitive, cash flow management.