Empty Pockets — Is your current budget leaving you high and dry? Your cash flow may need a values check.

By Amy Gage

When your colleague buys a new car, you congratulate her on the purchase. When your neighbor puts an addition on his house, you probably ask him for a tour.

But when you find a way to tuck away 10 percent of your income each year for your retirement, where are the high-fives and the accolades?

“You get a lot of recognition for consumption, but no one says, ‘You didn’t go shopping this weekend, cool,’” says Mary Downs, director of the Thrivent Financial Fitness Club™ program. “We need to create an environment where people get positive reinforcement for meeting other prudent financial goals.”

That’s tough in a consumer-driven culture where, according to a 2005 study by the American Payroll Association, 74 percent of American families live from paycheck to paycheck. On top of that, they are barraged with advertising and credit card offers that urge them to spend, spend and spend.

Maybe, like many people trying to keep up or simply get by, you have given in to the temptation of these alluring credit offers and found yourself in the clutches of the Debt Monster—a wily beast that stands between you and financial security. How do you stop this downward spiral, catch your breath and find a way to become a more reflective—and less reactive—money manager?

It’s important to start with stewardship and values, says Kevin Olsen, a program developer at Thrivent Financial for Lutherans. Olsen recently helped launch the “More Than Money Matters™” workshop in which participants reflect on how they care for themselves, spend time with their children and give of their talents and financial resources. Most important, they think about their values, about what gives shape and meaning to their lives.

With that foundation in place, Olsen says, people are ready to think more proactively about money. “Everyone knows they should write a household budget, but many don’t do it,” he explains. “We’ve found that when we tie together those things that are most important to you, a budget becomes a tool that can help you live out your values.”

Here’s an interesting way to start the process. Track where your money goes. Jot down every penny you spend throughout the week. “It’s parallel to wanting to lose weight and writing down what you eat,” says Downs. “People may say, ‘Spending time with my family is important to me, so a family movie night at the theater would be a good idea.’ But if they’ve spent all their money on coffee or at restaurants, they’re not living out their values.”

She recommends the book All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren and Amelia Warren Tyagi (Free Press—a division of Simon and Schuster Inc., 2005). “The authors believe that you should devote 50 percent of your income to must-haves, 30 percent to wants and 20 percent to savings,” Downs says.

Money and Emotion
If managing money was easy, fewer people would be in debt. As it is, Americans overall have a negative savings rate for a second year in a row, according to the U.S. Department of Commerce. We spend more than we earn, and that’s a problem. But the real issue is the complex emotions surrounding money. Until we come to terms with that aspect of money, experts say, we’ll have difficulty getting a handle on how we spend it.

“When people are in trouble with their debt or finances, there is shame,” says Susan Aulie, senior director of financial services at Lutheran Social Service of Minnesota, a nonprofit organization in Duluth, Minnesota, whose largest service is financial counseling.

At the other end of the emotional spectrum is the thrill you feel when you go shopping, whether it’s to buy something for yourself or for a loved one. “Studies have shown that people literally get a jolt of dopamine, a chemical that makes their body feel good, when they purchase something they like,” Downs explains.

This strange disconnect is part of what makes managing cash flow so difficult and why it takes discipline to resist temptation.

“Traditional economics is based on the idea that people are rational when it comes to money. The fact is, we’re not,” says Bill McKinney, vice president of member and market development at Thrivent Financial.

While our own decisions have a significant impact on our financial situation, McKinney also points out that many people with significant debt have usually experienced one of three major life events: divorce, job loss or a major health problem. “If you’ve found yourself in those situations and are struggling with money, you need to avoid judging yourself as bad or incompetent,” he says. “You likely had little control over what happened to you.” But with help, he adds, you can climb back to financial solvency.

Those who simply want to get their values in line with their spending habits can start by defining values for themselves. If you value giving back to your church, write a budget that includes a monthly check. If you want to stay fit, then a health-club membership might be a wise investment. If saving for your children’s education is a priority, you may have to wait for a new car or take a more modest vacation.

It’s a matter of making informed choices. Back when Aulie was a credit counselor at Lutheran Social Service, she used to hold up a dollar bill and ask, “Who’s driving whom?” An important question. Her advice? “Recognize that you can take control. Even though the world is saying you need it, you’ve got to step back and make that choice for yourself.”

Amy Gage is a writer in Northfield, Minnesota, who contributes regularly to Thrivent magazine.

Your Money, Your Life — To be a more aware and informed consumer, try these four steps:

#1 Think about what you would take with you if you had to leave your home in five minutes. What does that tell you about what really matters?

#2 Write down your dreams. Do your checkbook register and credit-card receipts reflect them? Be honest with your answers.

#3 Watch less television, or get up and walk away during the commercials to avoid temptation.

#4 Develop a 30-day “wait and see” policy. Chances are that something you want today might not seem so “necessary” next month.