Is Your Money Unemployed? Replace budgeting with goal setting and give your money a job

By Christopher Rufus Sweeney

If you are willing to live like no one else will early in life, then you can live like no one else can later in life.”

James Dahle, MD, “The White Coat Investor”

As we developed our financial literacy course for medical students, my colleague Emma Crawford and I initially called the first module “Budgeting”.  We quickly realized no one likes to create a budget much less stick to it. So, we changed our perspective and called the module “Budgeting: Goal Setting”.

Goal setting is all about giving your money a job… a very empowering activity. And, to add a little sugar to the medicine, we’ve replaced the “b” word altogether and use “earmarking” instead.

Emma and I created this course to give medical students a scaffolding on which to build their futures… financial and otherwise. Goal setting and earmarking challenges you to do three things:

  1. Determine and rank the values that drive you
  2. Decide the goals that are most important for you to achieve
  3. Make sure your spending habits reflect your values and goals

These steps are simple to understand, but they are perhaps some of the most challenging to live by. There are plenty of studies about the psychology of why we struggle with these but one published in the Journal of Consumer Psychology is particularly helpful. It’s titled, “If money doesn’t make you happy, then you probably aren’t spending it right” and it is available on sciencedirect.com. The title speaks for itself.

When determining your values and identifying your goals, one key takeaway from the study may be very helpful: Buy experiences instead of things. Because we quickly get used to new things, the happiness we experience is fleeting. With experiences, new and repeated, the happiness we experience is much more enduring.

Another key takeaway is easy to say but extremely difficult to do: Pursue your own goals, not anyone else’s. This is where your values come in; when you are very clear about what they are, and you review them often, they protect you from getting caught up in someone else’s definition of what’s important in life. (The quote by James Dahle, MD at the beginning of this article speaks to the reward you can expect when you stick to your values.)

Once you have your values and goals, you need to decide how to earmark your money. Here is a simple table with my spending categories to help you get started.

  NON-NEGOTIABLE NEGOTIABLE
FIXEDHousing
Transportation
Insurance
Savings
Subscription streaming services
Amazon Prime
VARIABLEFood
Gasoline
Hobbies
Nights out
Vacation

There are a number of very good online resources to help you set up, manage and stick to your goals. In the course, we run through a detailed explanation of how to use an app called Mint. Without actually going online to do so, here are some of the soundest steps you can take to give all of your money the job of ensuring you achieve your goals:

  • Look at your personal history of spending. (With apps like Mint, you track your credit and debit card activity)
  • Track your spending back at least a month… preferably six months
  • Assign categories of spending for all transactions
  • Once you know how much you spend on average, you can refine or create new categories of spending as needed
  • Set a monthly budget and identify where you can cut back if needed
  • Keep track of how you’re doing on at least a weekly basis

What do you learn from tracking your expenses? First, you learn where all your money is going. Without a doubt, you will be surprised at how many different ways you spend money and, most importantly, how little much of your spending contributes to the achievement of your goals. In other words, you learn how to recognize when you are spending money towards the achievement of someone else’s goals (increasing Starbuck’s income comes to mind).

The best result of earmarking is it gives you a clear picture of what you can do to accelerate your progress to your bigger longer-term goals. The sense of power and satisfaction even the smallest step towards those bigger goals is invigorating and an acknowledgement of your ability to be in control of your money instead of suffering as your money controls you.

Next blog:

Live Like a Resident: If you live and work like a resident, you can become financially independent in 10-12 years. That feels good.

One thought on “Is Your Money Unemployed? Replace budgeting with goal setting and give your money a job

  1. Great post for personal finance, thank you Dr. Sweeney.

    What if we used some of the same principles to make the medical environment more happy, buying experiences like mental health and general coordination of care, instead of material buildings or material devices. There is a proper balance isn’t there between material and buying experience like medical advice.

    I encourage us in our personal lives and in our professional lives to steward our resources. Our patients need both your personal and professional health for them to be healthy.

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