Chapter 7 - Budgeting and Financial Order

Furthermore, a budget is a very powerful spell in the arsenal of an order mage. It provides an ordered structure to daily spending habits, and shields against devastating errors in major decisions such as home and vehicle purchases. The temptation to buy more home than you can afford is a terrible trap. The financial and emotional pressure that a huge mortgage can bring is bad enough, but the added costs of utilities, home insurance and maintenance are often overlooked when consumers shop for homes. For this reason, in addition to the nickel and dime costs, a budget reasonably maintained can provide immense peace of mind. I recommend this most strongly for married couples. Whereas one conscientious individual may keep their spending to within their means intuitively, married persons will often have contrasting beliefs about their true financial position. In this case it takes a budget, with numbers down on paper and a true cash flow analysis to bring both persons together in agreement.

The illustration below is a simplified version of an Expense worksheet for a budget. You may also download an Excel copy by visiting my Facebook group “Avatars of Order.” One complicating factor is that you need to convert periodic expenses into a monthly average. In the worksheet below, I have assumed that some expenses, such as unpredictable medical copays, as well as special expenses, like birthday and holiday presents for the kids, are estimated on an annual basis. So I created the following formulas in the worksheet. For Annualized costs; x/12, for monthly costs, simply x, for weekly costs; x*52/12. For tuition I assumed a two-semester year and used x*2/12 (or x/6, which is the same thing). You may find this works well for you, but there are tons of “free” budget worksheets available online. Whatever you use, please take the time to make sure you are including ALL your expenses. The only thing that is worse than no budget is a budget with gaps in it! When going to unfamiliar websites for information, be careful what you download, you may be signing yourself up for a lot of unwanted spam or a subscription which will cost you later. Best practice is to look up reviews of the website and read a few before you download anything from them. Also, run an antivirus scan afterward.

This sheet alone is often very informative. Many people will be surprised at how much they are actually spending, since we don’t often think beyond the normal monthly items. That is the powerful moment when people have the chance to make a paradigm shift in their thinking and begin to be as frugal as their circumstances require. Great things can happen if they let them at this juncture. 

Monthly income is generally much easier to calculate, since so many adults are living on a fixed salary or two. Adding in items such as one-twelfth of an annual bonus is also fairly simple. Then it is just a matter of deciding whether one is running a deficit or saving money on average. If you follow these steps and discover you are spending beyond your means, then you have the chance to make changes and improve your financial outlook. The decision is difficult, but produces a peace of mind and sense of confidence that is worth more than a few nice meals at fancy restaurants. I don’t mean to sound insensitive when saying this. Perhaps you are in a very tight position and are having difficulty paying off the bare necessities. While borrowing may seem to be your only option, don’t delay in seeking additional income. Debt is a dangerous and expensive thing to incur.

When it comes to saving money or paying off debt, look closely at any credit cards you are using. Many of them charge high interest rates, and it’s usually more beneficial in the long run to pay off credit card debt rather than making new investments. Also, think twice before paying down on a mortgage. In most cases, home mortgage interest is tax-deductible, so when you pay it down, you may be saving less than you think. A consultation with a CPA mage or a Financial Advisor mage may be a wise move.

Now, it is one thing to make a budget, it is another thing altogether to stick with it. I highly recommend that when you sit down to plan your week, you also review your weekly savings and see how you are doing. Each week will be unique, since one week you might pay the mortgage, another you might pay the electric bill, so don’t get alarmed if one week looks particularly bad. Most of your focus should be on discretionary spending. If you overdid it last week, not to worry…tighten your belt a bit over the next week or two. Unless you have sophisticated software this may take a bit of time. You must include cash, check and credit card activity.

In this case, probing backward in time is as important as looking forward. Reviewing your transactions and reconciling your bank and credit card accounts are the surest way to catch fraudulent transactions and save you money. The statistics on this are alarming. The US Federal Trade Commission reported fraud losses in 2022 at 8.8 billion US dollars, a 30% increase over 2021! And that figure is only for US consumers and does not include unreported losses.[1] Many credit card companies and banks have become quite savvy at identifying suspicious purchase requests, but this does not take the place of consumer vigilance. When you do your weekly planning, please make time to review all your banking activity. Even if all the transactions are legit, it is very useful to stay aware of your account balances. This knowledge will help you make informed spending decisions and rein in impulse shopping. Using online banking can be very helpful here. More and more banks are offering powerful online tools as a means of tracking your spending as well as identifying any questionable transactions. Taking the time to familiarize yourself with these options can expand your organizational repertoire and make your job easier. Speaking of familiarizing yourself, wizards and witches often are reputed to adopt allied beings called familiars. Think of your bank as your familiar and your mage status is automatically enhanced!

If you are married, it’s best to sit down and review your budget and spending together. Both of you are spenders and both need to be equally aware of your progress. This was one mistake I made in my own marriage. I was the accountant and I felt budgeting and financial decisions were my responsibility. Unfortunately, since I did not want to burden my wife with my awaremenss of the tight finances we often dealt with, she continued to spend as she thought necessary. In other words, the order mage is often the advisor to the monarch and must be willing to share bad news and hard counsel or the king or queen will make poor choices!

One budgetary issue that can be very confusing is that of insurance. It can be very difficult to determine how much insurance is the right amount for your situation. While consulting with a Certified Financial Planner has many benefits, it never hurts to follow common sense as well. If you already have long-term disability insurance, think twice before accepting that offer for accidental dismemberment insurance on top of it. There is only one you, and some policies will not pay if you already are covered by someone else. Read the fine print!

Sooner or later, something big will go wrong that will blow your budget out of the water completely. An auto accident, a flood, a major medical bill, any of these can be catastrophic if you are not prepared for them. In addition to insurance, at some point in time you will need to draw on savings. You won’t be able to draw on what you don’t have, so please make it a point to include some monthly savings in your budget.

Ironically, it is often high-income earners who are most seriously in need of budgeting. They are the ones who are most tempted to believe that they can carry substantial debt and not run the risk of disaster. The worst-case scenario will involve a sudden loss of income, or major expense like a leaky roof or burst sewer main. If this happens, already having substantial debt throws them into a bad situation. Even if nothing bad does happen, monthly interest payments on loans or credit cards can be crippling over time. Sticking with a carefully crafted budget is perhaps the best defense against financial ruin in the future for rich and poor alike.