When I was in high school, I had one financial priority: to get my own car. I got a job and eschewed pricey off-campus lunch options so that every penny I made would go toward the car. In the end, I was able to buy my very own (and very used) Ford Explorer. No lunch would have tasted as good as buying that car felt.
As I’ve gotten older, my financial trade-offs have evolved. A house has unseated a car as my top savings goal. And thankfully, I’m no longer hoarding baby-sitting money in order to fill up my gas tank. But buying that car taught me my first lesson in financial trade-offs: You can have whatever you want; you just can’t have everything you want. So how do you decide what to spend your money on?
Finding Your (Financial) Happy Place
Every month, my husband and I sit down to a “budget and wine” session where we check in on our spending and discuss any financial changes. (The wine is a critical component in making the budget part seem fun.) One of the most important tasks we do is take a look at our expenses and reflect on the value of each expense. If we spent $800 on restaurants last month, did we get $800 worth of value for that?
This technique, celebrated in Your Money or Your Life by Vicki Robin, has helped us home in on where we like to spend and what categories we can trim or eliminate because they do not provide us much enjoyment. My husband and I favor traveling and eating out, but those are not everyone’s priorities. Figure out what means the most to you and give yourself permission to spend in those areas while avoiding others. But perhaps the most important point is to find a pleasurable reward for hosting a monthly budgeting session (hence the wine), or chances are you’ll end up skipping it.
If All Your Friends Jumped Off a Bridge, Would You?
Inevitably, you are constantly exposed to all sorts of expenses that compete for your dollars. Friends plan dinners, families plan reunions, people get married—all of which cost money. Paying for every activity that your loved ones want you to attend can add up quickly, taking money away from activities you may prefer to be doing.
It’s easy to get caught up in the moment and spend on whatever is making the loudest demands. But to get the most out of your money, spend only on what matters the most to you. This may involve having some tough conversations with people you love, but you will regain financial control of your life.
“Can’t” and “won’t” aren’t the same thing. Just because you can afford to spend your money on something doesn’t mean that you should.
