Cur­tail Ex­tra Spend­ing, Even When It’s With Cash

The Washington Post Sunday - - Personal Finance - The Chan­dlers

Ages: Ta­nia, 39. Carl, 38. Back­ground: Mar­ried with two chil­dren, Myles and Syd­ney, and liv­ing in the sub­urbs in Mary­land. Ta­nia is a school coun­selor. Carl is a sys­tems con­sul­tant. To­gether they earn about $137,000 a year.

New Year’s res­o­lu­tions: Build up an emer­gency fund, and pay down debt.

Progress so far: They’ve made a good dent in their $14,400 credit card debt. They’ve paid off about $2,400 of it, start­ing with the two cards with the low­est bal­ances. They’ve saved $3,200.

Their chal­lenge: They still haven’t de­vel­oped a bud­get. The cou­ple has worked hard at watch­ing ev­ery­day spend­ing. They pack their lunches for work. They’ve nixed spend­ing on vacation trips. Carl even took on some ex­tra work.

But there were some re­cent un­nec­es­sary pur­chases, which they tried to jus­tify by pay­ing with cash. The Chan­dlers said they needed new fam­ily-room furniture, and Carl bought a PlayS­ta­tion 3.

I do un­der­stand why they thought the ex­pen­di­tures weren’t out of line. The cou­ple thought the sav­ings achieved in other places made room for the pur­chases. This is a com­mon mis­take peo­ple make af­ter months of sav­ings — re­ward­ing them­selves with some­thing they’ve wanted. The prob­lem is that such a pur­chase keeps them from reach­ing their goal sooner. If ei­ther one of the Chan­dlers be­came un­em­ployed or dis­abled or if a ma­jor ex­pense arose, that cri­sis could take them out fi­nan­cially. They don’t have enough saved even for one month to meet their debt pay­ments, mort­gage and ba­sic house­hold ex­penses.

You can’t keep spend­ing, even if you’re us­ing cash, when you’re in debt. All nonessen­tial pur­chases and wants, such as a vacation or a game sys­tem, have to be put off. The debt comes first.

The next step: The Chan­dlers have promised to not buy any more un­nec­es­sary items. They also promised to cre­ate a bud­get that will be their bi­ble for spend­ing. If it’s not in the bud­get, it can’t be bought.

BY NIKKI KAHN — THE WASH­ING­TON POST

Carl Chan­dler, with Syd­ney, 2, and Myles, 5, fixes din­ner as his wife pre­pares lunch­boxes. They’re watch­ing ev­ery­day spend­ing but made some un­needed pur­chases.

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