How to Decide What to Spend
The key to saving, as everyone knows, is spending less than you earn. So simple! But how can you control your spending when there are countless things to spend your money on?
In The Simple Dollar, Trent Hamm proposes this philosophy of spending and saving: “Be super cheap on whatever doesn’t matter to you, and spend responsibly on what’s important to you.”
But how exactly do you understand what is important to you? Books, travel, luxury goods, toilet paper – how do you decide which things in your life are worth spending a little more money on?
Some things are obvious, even if they are not “normal” things that society / personal finance sites say money can be spent on. Like Hamm, you cannot be a big foodie, so spending on food means nothing to you. On the other hand, you can get a lot of fun with certain fresh or more expensive ingredients or restaurants.
Likewise, if looking your best is important to you, spending on a shampoo / conditioner that works for you, makeup that doesn’t cause breakouts, and a quality lotion can be worth it. If this is something you value, it is not overwhelming, although any personal finance site may tell you otherwise.
So how do you decide what you can save money on? Hamm has several suggestions, but the most resonant one is that you can be flexible with yourself. You don’t have to decide right now what you will or will not spend and then stick to it – you can experiment with different spending patterns and find the right balance.
To do this, you can conduct a cost audit. Hamm writes:
Sit down with monthly credit card statements and debit card statements. Review each line in these statements and ask yourself a simple question: “Was the expense justified?”
If you cannot immediately answer with a firm yes and can explain why, you should seriously consider reducing these costs in the future.
If you do this every month, you will discover patterns in your spending that you can then cut back. “I could notice that I had a bunch of small expenses when I went to visit family members, and they were all easily forgotten,” writes Hamm. Why didn’t I just take my bag of food with me and save about 75 percent of those expenses?
I will give you a recent example from my own life: I love raspberries, but have always considered them a luxury, since in New York they can cost between $ 4 and $ 5 per container. Recently, however, I realized that this is not the case, that most of the cost if I buy two or three containers per week, given the potential harmful food they replace in my diet (one of these head scratching positions that Hamm wrote about ) and the happiness they cause. Yes, they are expensive, but they add more value to my life than they take away. Other people – yes, I’m sure many of our commenters – will find this a unnecessary purchase, but for me raspberries are worth their money.
Okay, raspberries are an approved expense, but what about junk food? I can exclude it, then come back next month to see if I really missed it (maybe not). However, as Hamm writes, “I usually find that if I cut myself too much and regret something, it’s because the cut has damaged something else that I value. Maybe I did something that hurt the friendship, or maybe I actually violated some hobby or area of life that really matters to me, and at first glance it was not obvious. “
When you realize that you have cut too much, you can think about what value you are missing in your life and add it back. “Thinking about the wrong spending choices until I really understand why it’s a bad thing tends to change my spending. – good habits, so in the future there will be fewer and fewer spending mistakes when I act instinctively, ”writes Hamm.
So, instead of spending on things you don’t really value, you can save money on what you really value, be it high quality shampoo, raspberries, or something else, in your savings account. Enjoy your money.