Realities of Fixing the Household Budget

August 12, 2019

Planning & Saving

A Simple Equation with Uncomfortable Results

Although the equation of balancing a budget is simple (income ˂ expenses = debt), people often rationalize growing debt, counting on some future raise or windfall to explain how they will pay off their mounting obligations. But like with a leaky pipe draining into a bucket, delaying the repair of a hole in the budget leads to a bigger mess down the line. Eventually, the situation says “Enough!” and a couple is forced to face the facts and come up with a plan for earning more and/or spending less to balance their budget. Although creating this type of plan can be uncomfortable, it’s crucial that financial planning is worked on with unity and good faith. What are the options?

Growing or Cutting?

It is possible to earn more money by working during less-popular shifts or perhaps looking into higher-paying jobs. When reviewing the expense side, the categories where it is possible to cut include food (not ordering takeout once a week), clothing (relying more on sales and hand-me-downs), transportation (buying used cars instead of leasing or even giving up one vehicle), and leisure (vacationing close to home). Running a large household is a big endeavor with many moving parts, and any change in one department will affect the others. Also, several factors may make either cutting or growing a better option in a specific situation.

Cutting Has Limits and Ramifications

One apparent reason to favor growing income over cutting costs is that there is theoretically no limit to what someone can earn, but it’s impossible to cut a budget beyond a certain extent. When their backs are to the wall, people can frequently surprise themselves by unleashing dormant talents and abilities and increasing their pay significantly. You might be a budding medical researcher or inventor or perhaps an excellent project manager and end up earning more than you’ve ever imagined possible. But even if you cut your costs to the bone, you can’t save more than the value of the extras abandoned. Also, a drastic expense cut can inflict great pain on the entire family. Consider the intense friction that may arise when downgrading to one vehicle, for example, and how kids may be resentful, even rebellious when they don’t get what they feel they’re entitled to. Earning more money can end up being a very satisfying endeavor, whereas significant cost-cutting rarely is.

But Additional Earnings Are Shared

While earning more money sounds more attractive than cutting, the reality is more complicated than it may seem. First, minimizing certain expenses is mostly within a family’s control and may require little time and effort, but earning additional income often entails taking risks and forgoing time spent with family or used for Torah study or even maintaining good health (sufficient sleep and exercise). Another big issue with rising income is that the IRS views the extra dollars earned as ripe for the taking. The tax code (as well as government programs) treats small incomes as untouchable, but as revenue grows, Uncle Sam grabs a larger and larger cut of the additional (marginal) income. If chasing extra income requires significant sacrifice of time and energy, the after-tax earnings may seem a hollow victory versus lowering expenses, where every penny saved will be to your benefit.

When Men Want Less and Women Want More

Unlike fixing a pipe, there are infinite ways to stop a budgetary leak. Every couple must weigh their specific options and decide what their best—or “least-bad”—strategy is. This process can get rather sticky because each spouse (and the kids too) can have their opinion on the priorities of “musts” and “cants.” Should they skip the vacation or the takeout? New clothing or clubs? Should he take a second job or she a first? And they must get a new van… Anecdotally at least, one universal thing is that men tend to believe their wives need to spend less and women that their husbands have to earn more! Should budget negotiations hit a stalemate, couples in debt may need to call in the professionals (Mesila coaches, financial advisers, or accountants), or at least an unbiased party to mediate. Both spouses ultimately want the same thing: the ability to pay the plumber without a credit card.

Can Frugal Be Fun?

I’ve never understood the pleasure of drinking whiskey, but I’m told that the “smooth” taste of a good bourbon or scotch is an acquired taste. While some will never appreciate the thrill of frugality, many find that they can acquire an appreciation for it. Much of our relationship with money is cultural and habitual, but with a bit of practice, the excitement of bargain hunting, the rush of winning a negotiation, or the pride in being mistapek b’mu’at can be very enjoyable. Or at least, so I’m told.