To me, one of the most basic principles in all of personal finance is the fact that someone can take a look at your bank/credit card statement and identify your priorities. How and where you spend your money should be a direct representation of your priorities and if it’s not, then you either have to change your priorities or adjust your spending.
Examining Our Spending Habits
If many of us look at our bank accounts we would see that cable TV, Internet service, private school for our children, comic book collections, video game consoles, computer equipment and other electronics, and entertainment are all high on a list of priorities. The problem with that is if you ask many people what their priorities are, those things are not high on the list.
When you start to talk to people about what their priorities are they will mention their goals and dreams and aspirations – a lot of these things may seem out of reach. My contention is that if these things are as important to us as we say they are, then they need to take up the bulk of our spending.
I understand that there are some basics that we have to spend money on, such as food, shelter, and clothing; but outside of that, just about everything else that we have in our lives can be seen as a luxury. There were times when most of the these luxury items didn’t exist, and even today – with them being in abundance – there are many people who thrive and survive without them.
I am not trying to sit here and judge everyone’s spending or priorities, but what I am saying is that we all need to evaluate our spending and make sure it is in line with our priorities and goals. If you love to travel and you really don’t care that much for video games, I expect to see you with a savings account earmarked for your travels, and I don’t expect you to spend an extreme amount of money on video game consoles, subscriptions, and everything else that’s associated with game play.
The same thing is true when it comes to cars. If having a luxury car is not a priority, then you shouldn’t have an enormous monthly car bill, while the other things that you hold near and dear are being neglected.
My Spending Habits In The Past
As I have become more mature over the years when it comes to financial matters, I realized that my spending has not always been in line with my goals and priorities. However, I was able to correct this very early on. Although I have made many mistakes with my finances since becoming an adult, this is one thing that I have no longer had trouble with.
It wasn’t that I was mindfully spending in line with my goals, it’s just that I was always so broke and my income was so small that I was extremely limited on how I could spend my money, so my goals always had to take priority.
So what I chose to do was spend on things that I love: giving to church, music (I’m talking here about instruments and other things help me to be a better musician), spending time with friends and family (which would usually involve increased spending on eating out and also on gas), education, and other smaller things that I felt were important at the time.
The biggest problem that I faced was a lack of patience, and many times I was unwilling to wait until I had saved enough money in order to purchase the things that I thought were important.
We Need To Determine Our Spending Motives
It is vitally important for us to examine every dollar that we spend and what the motive is behind that spending. A failure to do this will mean that we will pour thousands or even tens or hundreds of thousands of dollars into merchandise, experiences, and other things that don’t bring us long-term satisfaction or pleasure.
Doing What’s “Expected” Or What Moves Us Toward Our Goals?
Too many of us have maxed out credit cards and other huge loan accounts because we are paying for things that barely bring us pleasure or help us to our goals. For instance, I have seen and heard so many people state that buying a home was a necessity, even though their life did not necessitate it (by their own admission after a round a questioning). In most cases, their stated reason for wanting to purchase a home was usually something along the lines of, “this is what adults do”, or they’re, “moving on with another step in their life”.
So essentially, they felt that from where they were in life, the next natural step was to purchase a home – in other words, they were pouring money into an expectation that society placed on them, rather than something that they generally wanted in their hearts.
I believe the same thing happens with cars: we get to a certain age where buying a car for a few thousand dollars (that isn’t the top-of-the-line and may need a couple of small repairs) no longer satisfies us. We feel that as we get older – as almost a rite of passage – we should go out and buy an expensive car, or at least a new one, and tie up tens of thousands of dollars for years at a time. However, if we examine our priorities, having a brand-new top-of-the-line car doesn’t make the list for most of us.
So Is Enjoying Material Things Sinful?
Again, I’m not saying that anything material is bad, but what I am saying is that we need to make sure that our spending supports our goals in life. I know this sounds pretty simple, but most of the people I sit down with (to create or revamp their budget) do not follow this principle.
I have no problem with someone spending $1,000 or even $1500 on food and entertainment in a month if that is what is most important to them. However, I would also expect that person to cut out any unnecessary spending in order to balance their budget (if that is needed based on their income level).
Chasing What Matters!
I could think of the man who I wrote about a few years ago, who was content in an 89 square-foot home (or even the guy who ate a relatively healthy diet for $1/day). Obviously having a huge home was not at the top of the list as far as his priorities were concerned; so he puts his money towards things that are important to him, and he lives in a home that is smaller than many master bedrooms that I’ve seen.
So that is my challenge to you and to me, figure out what things are most important in your life and make sure you’re spending matches that. Because if it doesn’t, then you are wasting a lot of money; and if you are in debt, you are essentially borrowing to pay for a dream that you don’t even want!