Can’t stop spending money?
To reach our personal finance goals, most of us have to stop spending on other things. Our time is finite, and so is money, unless you’re someone like Bill or Melinda Gates. We don’t really know how much time we have on the planet, but it’s not forever; most of us don’t know how much money we’ll have over the span of our lifetimes, but we know there’s a limit.
In order to live our “best lives” then, we’ll need to prioritize.
Does spending money make us happy?
Recently there has been quite a bit of research into what makes us happy. It turns out many purchases tend to increase happiness briefly, and then we settle back into our baseline level of happiness. Experiences seem to elevate our happiness for a longer time than almost anything else. Since buying “stuff” doesn’t make us happier over the long term, ignoring social status signifiers will make it easier to afford the things you genuinely want, instead of spending to maintain an image.
We do have some needs to spend on, but consider how spending on these will bring long-term happiness. Will buying a big house with the biggest mortgage you can afford make you happy, or does it force you to work at a job you don’t really like, just to afford the payments? Many Americans need cars, either because they don’t live in the city, or the city they live in doesn’t have good public transportation. Do you need to buy the newest, flashiest car on the lot?
It may give you a thrill at first, but eventually you’ll get used to it, and it won’t bring you as much pleasure over time.
Thinking about spending for necessary items
After moving from New York City to Southern California, I needed a car. I love driving around tight turns with the wind in my hair, so I bought a Mazda Miata convertible. There are other convertibles out there, but the Miata is relatively inexpensive both to buy and maintain. And I loved that car — I only gave it up when it was 13 years old and the head gasket blew. It suited my lifestyle: I lived in Southern California where it doesn’t rain much and only snows at elevation, and I didn’t have any kids or a husband who might have difficulty wedging himself into the passenger seat. I’m not a tall person (understatement of the year!) and I don’t regularly carry anything bigger than luggage that can fit in the overhead compartment on an airplane. The trunk of a Miata is hilariously tiny.
When I moved briefly to the East Coast, though, I had to put my top up all winter and often during the rest of the year because it rains and snows there on a more regular basis. The car was fine in the rain, but not so much in the cold and snow.
After my Miata died, I bought a used Toyota Prius. I didn’t need (or want to pay the full price for) a brand new car and was fine letting some other owner handle the depreciation. The latest model Miata was only about a year old, so there were no used ones to be found. I also knew that since I was moving to the desert, I’d be spending a few months out of the year with the air-conditioning constantly on, so a convertible made less sense. The Prius is quite large, comparatively, but not as large as many of the other vehicles out there. Although I have to admit, finding the Miata in a parking lot was a lot easier than finding a white Prius,especially in SoCal.
Thinking about your values is important when deciding to buy
So that’s one story about aligning a necessary purchase with values (and lifestyle). A small rear-wheel-drive convertible wouldn’t work as a daily driver for someone who lives in a snowy climate, or hauls large items regularly, or has children. More expensive and powerful convertibles exist, but a much cheaper option can satisfy a desire for a ragtop too.
Thinking about your values helps you prioritize.
If you’re saving up for a downpayment on a house, because you value having your own home to live in, then going out to eat at an expensive restaurant every weekend doesn’t serve you. It might be hard to completely eliminate those dinners at first, but you could choose somewhere to start, like only going once a month at first.
If you enjoy traveling and want to take long trips that require significant funds, you can think about your next trip when at the store and faced with a gadget or cute item that you want to buy. Even cheap little things add up over time, so take the money you would have spent in the store and add it to your travel budget instead.
You can have anything you want, but not everything
Being frugal in day-to-day living allows for more choices on the big goals.
If your expenses are low, you can save more money to spend on the things youwant to do. With enough savings you can go part-time at your job, or start your own business, or whatever you want to do; you won’t be stuck at a job you don’t like that has decent benefits and pays your mortgage. But it does require that you think carefully about what you spend on, and using your values as a guide will help you stop spending on the things you don’t really need.
Originally published on www.fabfemfinance.com.