[Read Step 4 of the Simple Living Guide. Go to Step 1]
The last step took us to the core of the program, asking three basic questions about our monthly expenses in each of our categories. Rather than the usual episodes of self-blame and guilt involved in budgeting, we simply asked ourselves whether we felt fulfilled in proportion to our expenses, whether the level of expense was in alignment with our values and life purpose, and how our expenses might change if we didn’t have to work for a living. We only answered the questions and moved on. We’re working on a change of lifestyle and to do that we need feedback to direct that change. Step 5 is also about giving ourselves the feedback we need on a longer-term basis. In this step, we’ll create a chart to show our progress over the months and years.
In recent years, millions of people borrowed money against their homes to finance remodelling, swimming pools, RVs, new cars and furniture, and to repay credit card debt (which they then started running up again). The thing is, as home prices started to fall, these same people have found themselves owing more than their homes are worth. The homeowners and lenders are suffering from record levels of foreclosure as a result. It was destined to happen; we can only keep borrowing money and spending more than we earn for so long. This is what Step 5 is all about. What matters isn’t what we do in any one particular month. It’s the trend that’s important. As we embark upon our change of lifestyle, seeing our personal trends becomes rewarding and fun. We hold focus, and continue the trend.
What would Enron do?
Would you invest in Enron? Of course not, if you knew the true picture. The company was spending far more than it earned, month after month, year after year. The only way Enron was able to pull that off without its investors pulling the plug was to hide the financial facts. All public corporations are required to disclose their financial cash flow to investors. Enron misled its investors and collapsed spectacularly. In the same way, many of us in the past have done our own “off-books accounting” just like Enron. In Step 5, all that is in the past. We create a wall chart of our cash flow, indicating our income and expenses month after month. Nothing is hidden; it’s clear how we’re doing financially.
Your Money or Your Life claims that our wall chart should be exactly that: a chart of our cash flow which we proudly display on our wall. One reason the authors give for putting it on the wall is that friends and relatives will cheer us on and be supportive as they watch us progress down the path to financial integrity and independence. While that’s a beautiful idea in a perfect world, many of us don’t live in that world. Our society isn’t exactly comprised of people who value financial integrity. Some of us following this program have encountered hostility to our shift to a more conscious, frugal lifestyle. Likewise, we aren’t all as outgoing as the authors. The wall chart invites conversation about our personal finances, when sometimes we’re more interested in discussing other aspects of life. For these reasons, many program participants keep their wall charts in their bedrooms, in a notebook, on the computer, or somewhere else private. What matters isn’t that the chart is public; what matters is that we have a chart and look at it regularly!
There are as many ways of making a chart as there are people following the Your Money Or Your Life program. Folks who like tinkering around with computers often enjoy feeding their financial data into personal finance programs or spreadsheets and generating charts electronically. Others, who aren’t so into technology, use paper and pens. Even though I have a computer background, I prefer my paper chart. I don’t have to turn on the computer, and it’s as simple as it gets. Ann likes to enter her finances into the computer, using a spreadsheet to give her a monthly chart.
At the far end of the spectrum is Jonathan, who not only makes his chart electronically, but he puts it on the Internet for the world to see. It’s not just a wall chart, it’s a world wide web chart!
Oh, but this month is unusual…
When I was in high school, I ate a lot of candy. I mean a lot of candy! As a result, I have quite a few old fillings in my teeth. One day a few weeks ago, one of those fillings failed as I ate my breakfast. My dentist hit me with a $1,200 bill for a crown on that tooth. Ouch! Because I’ve followed this program for a long time, I was able to pay the $1,200 cash. Last month’s expenses took a big jump as a result. Oh well, it’s just another unusual month. Some months are unusually high in expenses, while others are unusually low. The book makes a very good point that every month is an unusual month.
Looking at Jonathan’s wall chart, I can’t figure out what a “usual” month would be. His expenses appear to bounce wildly from month to month, even exceeding his income on nine occasions. But when we look at his average expenses, it’s clear that he’s saving about half of his income, on average The idea is to use the wall chart to look beyond the unusual months, reminding ourselves that we’re on a path to financial integrity and freedom.
Seeing progress, in two easy steps
The two keys to the wall chart, as given in the book, are simple:
Start
Keep going
For many of us, the wall chart is the easiest part of the whole Your Money Or Your Life program. It’s also the most visible and rewarding step. It’s not much trouble to put together that first chart. I just used some graph paper from the school supplies aisle of my local grocery store, and labelled it. Afterwards, updating it takes no time at all. The rewards are huge. Try it! You’ll be hooked after just a few months.
Next time we’ll dive into Step 6, with some practical ideas for living more frugally. After all the personal effort we’ve put into the first five steps, this step is refreshing as it gives a bunch of pointers to get us thinking about how we might embark upon our lifestyle change to Financial Integrity. The ideas range from the practical “bring your own shopping bags” to the deeper “stop trying to impress other people.” We’ll talk about those ideas and many more from other sources. Until then, put together that chart and plot a few months’ expenses!
[su_panel background=”#f2f2f2″ color=”#000000″ border=”0px none #ffffff” shadow=”0px 0px 0px #ffffff”]Fred Ecks was the volunteer Newsletter Editor for The Simple Living Network. He’s a dedicated follower of the 9-step program detailed in Your Money Or Your Life. He uses the time freed up in his life for writing, volunteering, sailing, and trail running. He maintains a Web Log www.crazyguyonabike.com.
