There will be some categories where the amounts are fixed— rent, mortgage, taxes, and so on. There will be other categories—in fact, the majority of categories—where you can actually decide what the total spent per year will be. You can almost make a game out of it with yourself. If you cut and color your hair every eight weeks, see if you can schedule it for every nine weeks. You’ll save the cost of one whole haircut each year and probably won’t notice. Is there one magazine subscription you can do without? Can you have three Friday movie nights a month instead of four (or five, in the months with five Fridays)? Can you have your windows cleaned every eight months instead of every six months? Keep deciding to trim, a little here, a little there, until what comes in matches what goes out. Keep your new truth with you as you begin to consider how you want to spend your money. With each decision you make, you are gaining power over your money.
After you’ve done your mental trimming, put down in writing the yearly total you decided on for each category. Now keep track of what you spend in each category, month by month. The best way to keep track is to create a chart or system that will work for you. Each month when you pay your bills, check your spending by category. If you use up any allocation early, and want to spend more in that category, you’ll have to make new decisions about what, if anything, you want to do by seeing where you stand with the other categories. Robbing Peter to pay Paul, so to speak, except that you’re Peter—and you’re also Paul.
For instance, say you decided you wanted to spend $2,000 this year on clothes but found a $200 coat you wanted in September, after the $2,000 was already spent. Check your other categories. Maybe you had to cut your vacation short and saved $200. Take the $200 and buy the coat. As long as the numbers always balance, you’re in the driver’s seat.
As a reminder, post the categories you’re trimming on the fridge, or on your bulletin board, or on a yellow stickie in your checkbook. Mark your three Friday movie nights in your calendar, so you’ll remember. Write down when you’re due to make your hair appointments for every nine weeks in your calendar. Note in your calendar when you’re due to have your windows washed again—in eight months instead of six. If the date is into next year, jot it down at the end of this year and transfer the dates.
You may find—as have many of my clients—that you can come up with wonderfully creative ways to trim your spending so that you hardly notice. One family (both parents work and their teenage kids aren’t home much) now has the garbage picked up every two weeks instead of every week, trimming a painless $200 a year. A single mother now goes to the grocery store every eight days instead of every single Saturday, simply paying more attention to the food she already has in the house. Last year she trimmed nearly $400 from what she allocated for food. Another client learned to do her own manicures and doesn’tmind a bit. Savings: close to $500 a year. Another client, who described himself as a “compulsive spender on CDs,” now weeds out the CDs he doesn’t listen to much anymore and trades them with friends. Last year he had trimmed $600 and had just as many fresh CDs to listen to. That same client also now does his taxes himself with a computer program, rather than going to his accountant. Savings: another $600. But only when you see in front of you how you spend your money now will you be able to decide how you would rather be spending your money. (If you look at everything and see no possible way you can decide to spend less anywhere, just keep reading. Later on we deal with ways of freeing up your money.)
How does this differ from being on a budget? With a budget you limit what you can spend each month, and that’s that. Here, you are not limiting what you can spend each month but simply deciding how you want to spend the money you already know you have to spend. Rather than being dictated by a restriction, your actions are dictated by the choices you make. As you read further into this book, and over the years as what you choose to spend your money on changes, your allocations will change.
You have just taken the hardest step toward financial freedom. With this step you have been honest with yourself. Now you know exactly where you stand.
The next steps will take you to where you want to be.

If you began this exercise knowing exactly where you stand financially, you’ll have confirmed that you do spend each month what you thought you did, and that you also earn at least as much as, if not more than, you spend. Bravo!
The chances are better, though, that if you’re like many of us, you’ve just confirmed that you spend more than you thought. Quite possibly you also spend more than you earn.
What can you do? You can do one or both of two things. Make more money and/or decide to spend less. Look at each of your categories again, and decide how much in each category you want to spend.
Notice my wording. I didn’t say how much you are allowed to spend. I did not say to spend less. I said, decide how much you want to spend in each category. If you’re spending more than you’re earning, this solution is not about creating limitations. It’s about making decisions—determining what you most want to spend your money on. If you can make more money realistically, without undue stress, in the immediate future (by changing jobs, say, or adding a second job), then you’re in a position where you may be able to earn what you spend and go on living the way you do right now, if you choose to. If you take this route, make sure that the numbers balance Out.
If you’re like most of us, however, more likely you need w decide to spend your money differently. This does not mean that you have to take one drastic action that crimps your pleasures and quality of life, such as getting by with one car when your family needs two. Unrealistic budget cuts, like unrealistic diets, never work. Consider, instead, making the decision to spend $25 to $30 less per month from fifteen or twenty of your spending categories.