Brian J. O'Connor

Follow Metro family's effort to cut monthly budget

One middle-class family's effort to cut $1,000 a month from their budget without moving, living on government cheese or killing each other

Being a personal finance writer is like working in theoretical physics: You don't know if any of the information you put out there really works, but as long as it sounds good, you get to keep your job.

But if we've learned anything from the Wall Street sharpies whose can't-fail calculations sent us into this Great Recession, good-sounding theories ain't enough.

Money talks. Theory walks.

And these days, even when the money talks, it's often saying, "Dude, you're broke."

So instead of spouting advice, I'll apply it to myself. Starting today and for the next 10 weeks, I'll devote this column to taking my own family budget apart, line-by-line, in a project called the Grand Experiment. Each week, I'll sift through one of our 10 largest spending categories, looking to lop $100 off of each one until we've cut our monthly spending by $1,000 -- an even grand.

The first step: figuring out just what those 10 categories are.

Planning ahead while looking backwards

I'd set up a basic budget three years ago, after the Your Money family moved back to Michigan. I thought I had a rather comprehensive approach using the Quicken program to track our cash flow (or, more accurately, cash ebb). Since then, I'd left the whole thing on automatic pilot, using it mostly at tax time, on the assumption that our spending didn't change much.

I didn't, for example, do a monthly review of our budget, sometimes going three months or more before downloading a few hundred transactions. Then I'd annoy my long-suffering wife, Mrs. Your Money, with questions like, "What's this $47.63 in July at Target for?"

The result was that when it came time to compile our year-to-date spending for this project, I was facing the financial equivalent of a garden that hadn't been weeded in three years.

Worse, Quicken's automatic downloading had gone haywire. Drug store purchases were in four categories, our tax preparer was listed as "Babysitter," and for half the year, every ATM withdrawal was categorized as "Christmas."

The biggest confusion was that purchases at the neighborhood party store wound up listed under "Avis Rent-a-Car." Yes, according to Quicken, someone at our house was renting a car three times a month. But at least they got a good deal: the exact same price as a six-pack.

The problem, says Robin Thompson of Budget Wise Consulting in Sterling Heights, is that I was tracking our spending instead of planning it.

"Software is great for tracking expenditures, but not for making course corrections during the month," Thompson says. "By the time you look it over, you're looking in the rearview mirror."

You can find Thompson's approach outlined in detail in two books available at her site, www.budgetwise.net. It hews pretty closely to what I've been doing, except for strictly limiting discretionary spending and setting up a separate non-monthly expense account (I usually just let that cash build up in the household account, which distorts our true financial picture).

And then there's also that one teeny-tiny mistake I was making: forgetting to look each month at whether the budget plan actually works.

10 weeks, $1,000

Thompson says any financial plan needs a strong goal, and the one for this experiment in saving certainly is definite: 10 weeks, 1,000 bucks. Next week, I'll tackle the first category. In the meantime, I'll be tweaking our budget to go more along Thompson's guidelines.

If you're going to try this at home, I know "budget" can be a repulsive, ugly-sounding word that suggests only deprivation, denial and suffering, like hearing someone say, "diet" or "Untitled Adam Sandler Project."

But this is the key to finding out exactly where your money is going, so remember: "Budget" is not a four-letter word.

It's six. If you can't tell the difference, let your spouse balance the checkbook.

boconnor@detnews.com (313) 222-2145