Effectively managing the Miscellaneous Category

Many of you keep a budget or a spending plan; or at least I hope you do.  Some keep it pretty strictly and others maybe not so much.  I hope this works as a guide to your financial life to keep you focused on your financial goals.  One item that you may have in your spending plan is the miscellaneous category.  Depending on how you manage the miscellaneous budget could be the difference between staying under budget or not.  The question I would ask is what is the purpose of your miscellaneous category?

Some may have a miscellaneous budget item to throw everything in there that they don't have another category for or if they've overspent on other budget items this may give them an excuse to say, "I'll throw it in  miscellaneous.". This allows them to get what they want now instead now and not have to wait.  So instead of being patient, saving up for the item, and purchasing the item they buy it now, put it on a credit card, and start paying interest on the item.

Does this sound like some of you?  Here are some tips to help you keep track of your miscellaneous spending and staying under budget

• Make sure you fund the miscellaneous budget - Make sure you don't get to the end of your money for the pay period and want to purchase something and say, "I'll put that under the miscellaneous budget" if you haven't funded it adequately.  You'll go over your budget.
  
• Keep track of what you are using your miscellaneous budget for - The key to keeping a budget intact is to keep it intact.  Keep track of what you're putting in your miscellaneous budget.   There are items that should have their own budget item.  For example, recreation or eating out should have their own category.

• Make sure you balance your miscellaneous expenses and retirement preparation - Just because you have extra money in your budget don't increase your budget by all of it.  Keep your retirement accounts in view and establish a regular contribution into a retirement account.  If your company has a matching program make sure you are contributing to it.  That's free money!
• Some use the miscellaneous budget item for unexpected expenses - it's really comforting to have an item with which you can place unexpected expenses, for example, the car needs repaired, you have to take an extra trip out of town, or your dryer goes on the fritz.  Once again, the key is to keep it funded by putting a percentage of your budget into this item each month.

• The Miscellaneous budget adds flexibility to your budget - While cutting a miscellaneous budget, or moving its spending to more clearly defined categories, can help achieve financial stability and better spending analysis, miscellaneous budgets are also useful for increasing flexibility. If your income rises and you have no need to increase the amount of money you save each month, you could reduce savings as a percentage of income and devote the additional percentage to miscellaneous spending. This leaves room for covering overages in other areas of the budget and creates the freedom to make occasional purchases without special planning.
  http://wiki.fool.com/Percentage_of_Income_and_Miscellaneous_Budget
   
• Keep your eye on the budget amount so you don't go over - Whether you're talking about the miscellaneous, grocery, or eating out budget item keep a cell or a location for how much is remaining in that item.  This will help you manage your spending especially towards the end of the pay period.

How do we break down and resolve financial infidelity?

Good Morning!
A couple of weeks ago I posed a situation that might be close to some of you-a case of financial infidelity.  The premise of the story was that someone, without their spouse's knowledge, signed up for a credit card, and racked the debt up to 20,000 or $25,000 in debt.  When the credit card company started calling because payments were late or incomplete it broke open and there was much hurt and distrust, and even thoughts of divorce.

How do we overcome financial infidelity?

First, we need to know the definition of financial infidelity. Wikipedia defines financial infidelity this way:

Financial infidelity is the secretive act of spending money, possessing credit and credit cards, holding secret accounts or stashes of money, borrowing money, or otherwise incurring debt unknown to one's spouse, partner, or significant other.[1] Adding to the monetary strain commonly associated with financial infidelity in a relationship is a subsequent loss of intimacy and trust in the relationship. Financial infidelity appears to be on the rise, with a 2005 study showing that 30% of respondents had lied about financial information and 25% had withheld information,[2] whereas a 2008 study showed that half the respondents had committed some form of financial infidelity.[3]

Come clean

The first step on the road to repair is to come clean with all your financial activities.  Share all the activities as well as all the money that was spent on these activities.  Write them down so you don't forget.  This may hurt, especially if there are many incidents, but push through it and get it out on the table.  Together, you may find that there are deeper issues like a gambling or spending problem and if you catch it now it could save you more heartache, and possibly your marriage, in the future. Make a commitment to never hide any important financial activity again.

Practice financial transparency

Practicing financial transparency is the first step to rebuilding trust.

• This means following a spending plan agreed upon by both of you.  This means you both have a vote and you don't move forward unless you both agree.
• Freeing up a little bit of spending money so you both can have some money to call your own and are not required to share.

Have regular "money meetings"

Once you've come clean and agreed to practice financial transparency you'll want to keep yourselves accountable. This is the purpose of money meetings.
Pick a time that works for both of you, not late at night when you're both tired, or when you're on the go and are focusing on many other things or when each of you are at work. Pick a time and even put it on the calendar if necessary so you don't forget.

Here are some of the topics you may discuss during this time:

• How is each of you doing overall?  This is a general question that may take some time.  Enough time spent here may be more important than the other items combined.
• Keep in mind your spouse's mindset on financial matters. I love spreadsheets and getting down to the nitty gritty of financial matters whereas my wife likes to look at money issues from the 10,000 foot level, without a lot of numbers.
• If available do you need to free up or cut some more money for a particular budget item? Groceries, Recreation, Transportation, Savings, etc.  If you are living tightly you may not have this luxury, don't be tempted to increase the budget item if you don't have the money.  Remember that each person has a vote in this process, resist the tendency to think your spouse is stupid for thinking the way he/she does.  Also, as Dave Ramsey has said that, and I agree with, any spending outside the spending plan is financial infidelity.

Be humble and apologetic

The final step and one that should be present throughout the process is to be humble and apologetic.  Realize you've made a mistake or several mistakes and work hard to make it right. This will allow you to rebuild trust in your marriage and work towards complete trust.  This will also get you started on the path of financial healing.  This may take a while but sticking with it will be worth it in the long run.

Listen to and/or read this case of Financial infidelity from Dave Ramsey 

I want to promise as you follow these steps and come clean, practice financial transparency, have regular meetings, and are humble and apologetic you'll feel the walls come down, trust enter back into your marriage, feel love and peace return to your home and lives.

Thank you for taking the time to read this blog, let me know if you have any comments or experiences that you'd like to share.

Thanks,
Greg and Jody