Prioritizing Your Spending to Improve Your Life and Financial Situation

Erik Basics, Financial Education 2 Comments

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There are many different ways to improve your financial situation. One way is to spend less on a monthly basis, and save the remaining amount.

While spending less, and saving more, sounds great in theory, in application, what exactly are you spending less on? What should you cut out of your usual spending? Should you make a budget?

Certain specific budgeting methods and savings ideas may work for you, these strategies do not talk about the mindset behind your spending.

Really, the simplest budgeting method is to look at your spending and see which expenses truly bring you enjoyment and happiness.

In this post, I want to share with you how you can prioritize your spending, bring joy to your life, and get a handle on your finances.

Spending Money on Things Which Bring You Joy

Let’s go back to the theory of improving your financial situation through spending less and saving more.

One of the most famous examples when talking about spending less is “The Latte Factor”, which was made popular in David Bach’s book, The Automatic Millionaire.

“The Latte Factor” are the little daily expenses which have the potential to add up over time.

If you spend $3.50 on a coffee and $1.50 on a bagel daily for breakfast at Starbucks, you are already at $5 for the day.

While $5 isn’t that much, if this is an everyday habit, this is $150 a month – just on breakfasts from Starbucks!

Maybe you don’t drink coffee, but have other small daily expenses which have the potential to add up over time. The idea of “The Latte Factor” still applies.

The point of “The Latte Factor” is that little expenses add up over time and can result in missed savings goals.

In the book, Bach recommends examining your expenses and thinking hard about what you need.

While I agree with the main point of “The Latte Factor”, I want to talk more in general about how I prioritize my spending to make sure I’m bringing fulfillment and joy to my life.

Spending Your Money on Your Passions

I have a few questions for you to think about.

These are more related to your life, than money, but will bring the answers you need to start getting better with your finances.

The questions are:

  • What are you passionate about?
  • What do you enjoy doing most?
  • Is there anything holding you back from doing these activities more?

The purpose behind these questions is to get you thinking about MATTERS to you.

For me, I’m passionate about spending time with my family, being healthy and active, and learning.

Since these are my passions, then I need to align my spending habits with these passions.

What does this look like in practice?

For my health, I’m not afraid to spend a little more money on healthy food and supplements. I am finding spending some money on a relatively nice bike, a rock climbing gym membership, and equipment which can help me reach my fitness goals.

For learning, I’m not afraid to invest in myself and buy a course, a book or seek help.

For spending time with my family, I’m fine spending money at a golf course my dad wants to play, or taking my family out to dinner once in a while.

These are things which matter to me and how I apply this thought.

Now, let’s change it up a little bit and talk about things which I don’t spend money on.

Spending Less on Things Which Don’t Matter to You

At the beginning of the previous section, I asked some questions which were looking to get to the core of what you enjoy doing with your time.

Now, let’s go to the other side.

  • What do you not like doing?
  • What are things you aren’t passionate about?
  • Do you find yourself stuck doing things you don’t enjoy?
  • With these things you don’t enjoy doing, are you spending money on them?
    • If so, why?

For example, I don’t watch TV. I realized after college that TV was a waste of my time and not worth my money.

With this, I don’t have Netflix, Hulu, HBO, or basic cable.

If I don’t enjoy watching TV, then it follows logically I shouldn’t pay for these services (and I don’t!).

Another thing I don’t spend a lot of money on is alcohol. While in my college days, I would drink a lot on the weekends, now, I’m fine going to the bar, having 1 beer, and then drinking water the rest of the night.

I’ve realized I can have a ton of fun with just 1 drink, and I can save $15-$25 by drinking water the rest of the night.

Along the same lines, I don’t really care that much about what car I drive. For me, when I bought a car, I had 2 wants: it’s not wimpy, and it gets good gas mileage.

I’m not a car person, so why should I spend a lot of money on a car!

These are seemingly obvious statements which make total sense after the fact, but when approaching these purchases for the first time, you could end up spending more than you actually want.

Is it Possible to be Intentional with All Expenses?

If you are a personal finance optimization weirdo like me, your takeaway from this article might be to look at every expense and purchase you make and categorize it as good or bad.

Unfortunately, you will have expenses throughout the month which you can’t get out of – rent, insurance, taxes, utility payments, etc.

While these expenses you cannot completely remove, there are ways to reduce them to give you an opportunity to have more money for what you really want to do.

For example, with housing expenses, it’s possible you want to live downtown to be close to the action.

That’s great, but do you need the nicest apartment or condo, or could you go with a step down and save a few hundred dollars a month?

Alternatively, does it make sense to get a roommate, house hack, or live in the suburbs and commute in to downtown when activities are going on?

I don’t have the answers to these questions as I don’t know your situation.

However, hopefully this article has given you food for thought with regards to your spending.

I want you to be more mindful of how you are spending your money.

I want to make sure you are being intentional with your spending, and not wasteful with your money.

At the end of the day, you should be spending money on things that matter to you, and not spending money on things that don’t matter to you.

Prioritize Your Spending to Improve Your Life and Financial Situation

I’ve been talking about how I prioritize my spending to align with my passions.

Now, it’s your turn.

What are you spending your money on? Are you spending your money on things which don’t bring you joy? How can you allocate more money towards what matters to you?

Remember, with all things in life, there’s balance.

It’s important to remember there will be items which don’t bring joy which you will need to buy from time to time.

However, with the questions and tips I’ve discussed above, hopefully you will be inspired to examine your spending habits and align them with your passions.

For more money saving tips, check out these articles:

Thanks for reading!

Readers: how do you prioritize your spending? After reading this post, are you going to stop any expenses which aren’t bringing joy?

Erik

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Comments 2

  1. Nice timing because I’ve been trying to think about and reconcile seemingly conflicting advice from FI blogs and then a few episodes I’ve listened to with Ramit Sethi and his assertion to sometimes spend more, rather than less.

    For example, I think this may be the right path if I need time back. I enjoy being a homeowner but don’t necessarily jump at mowing my lawn. It takes about an hour to do the front and back because I need to recharge the mower in-between. This is also before sunset so I either also need to cook or spend time with family. If I have to do that 3 times a month from let’s say May-Oct, 7 months x 3 mows is about 21 times which roughly means I will spend 16-18 hours mowing during a season. This does not count trimming or gardening or any other yard work, which I don’t do regularly anyway.

    So now my question to myself next season is, do I pay for someone to do this for me and get 20 hours back? I could instead spend that time with my kids, cook, side projects, or something else that brings me more value. 9 out of 10 times I need to mow during a critical time of the day where there’s higher opportunity cost.

    With groceries I think the answer is clearer: Instacart has saves me an hour or more each time I use it so more than pays for itself in value with not having to go out so much to the store.

    Paying more for convenience can sometimes be a good decision if it gives you back more time to focus on what matters most!

    1. Post
      Author

      Hey KR, thank you for the comment and your thoughts 🙂

      You make a great point and something I hadn’t considered actually – spending more instead of cutting back.

      What I was suggesting was possibly just spending more on what matters to you, and then at the same time, cutting back on things which don’t matter to you 🙂 But your way is totally fine as well – it just depends on your goals!

      There is 0 point to having money and making money if you don’t spend it on what you love and enjoy.

      Going from a 40% savings rate to a 38% savings rate (or whatever change of savings rate you are at) leads to much more enjoyment in the present, then it’s almost a no-brainer to me!

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